Capital Gain Tax Exemption

[Phuong Uyen N.]

Hello BP, 

Please give me your advice on this:

I have purchased a property under my LLC. The property is located out of the state from my Residence-Address (Address on Driver License). I have primary been living in this property for the last two years while flipping other houses in the area. Will this property be eligible for capital gain tax exemption when I sell it? I have never claim for capital gain tax exemption in the past.

Thanks all!

[Aaron K.]

This is more of an accountant question with some of the particulars but if you had that as your primary residence ie where you file taxes from where your mail goes etc. then probably.

[Bob Norton]

Not if it's owned by your LLC.

[Natalie Kolodij]

Is it a single member LLC?

If so that doesn't void your 121 exclusion. 

You need to have owned and occupied it for 2 of the last 5 years. 

Which house did you list as your primary on your taxes? Why was your license not updated?

[Briana Bean]

I had friend that lived in a house over 2 years in Montana, and they were taxed on their gains. I'm not sure how the LLC plays into it, but I know state to state this can vary period.

[Wayne Brooks]

@Briana Bean The 121 exclusion is for Federal capital gain taxes....it doesn’t vary state to state.

[Briana Bean]

There was some other sort of tax that she had to pay -- essentially on the gains of the house, but it was a state tax. 

[Bob Norton]

Not all states follow the Federal rules on capital gains.

[David M.]

@Phuong Uyen N.

If it's a single member LLC and you made no tax status elections, then for federal purposes it's a disregarded entity. Just a funny term that means the federal government doesn't treat the LLC as a separate entity for tax purposes. So, I could see how you could possibly get the capital gains exclusion

For State tax purposes, that’s is very State dependent...

[Steven Hamilton II]

A SMLLC will still qualify: here is the direct citation Reg 1.121(c)(3)(ii)