Living in rental and converting to condo regime

[Account Closed]

Hello, I have a property in booming east Austin.

1. I lived in it for 7 years, rented it for 3 years, now living back in it (to avoid capital gains tax if I sell). It is my primary residence but still in an LLC (owned by me solely)…. just don't want to pay to have it moved out. Please correct me if I'm wrong about assuming I'll have no captains tax on up to 250k profit/single bring that I'll be living in it as primary 2 out of 5 years.


2. I’m thinking Austin just isn’t for me anymore. The lot is large with 3 new ~million dollar homes on each side and back. Condo regimes are popular here and I’m thinking maybe converting mine to a condo regime and sell either the back lot or the front lot with house and keep the other. How would this affect my capital gains taxes I’m trying to avoid? I’d be selling only part of the property (or both if it made financial sense). Any idea how much legal fees and headache having a condo regime set up would be?

My goal is to get the most $$.
TIA

[Bill B.]

A simplified version of how I would explain your situation.

1) if it was a rental first it’s always prorated taxes due. Buy a new property, rent it out for a year and then move in for 19 years as your primary. it’s 95% tax free (19/20ths) it doesn’t matter you passed the 2 of 5 years rule  

2) if there’s any rental activity before the 5 year look back period, it’s pro-rated. You buy a new primary , live in it for 8 years. Then you rent it out for 2 years before moving back in to it for 10 years. That’s 90% tax exempt (18/20ths) because there’s rental activity before the 5 year look back period. 

You’re only guaranteed 100% tax free (up to limits) if it’s your primary first and you sell before the 3 year anniversary of it not being your primary home. 

If Micahel corrects anything I said, believe him, he’s an expert. I’m just trying to explain what I believe would occur in your situation. Your CPA should 100% agree with him.