Last minute capital gains strategy for CO condo sale

[Joan MacDonald]

Posting for a friend (like, really I am). She needs strategies to avoid capital gains for a sale coming up in a few days. Owner is a NY resident. Subject property is a condo in CO. Sale date: Monday Nov 8, 2021. Ownership since 2010. Owner-occupied for 6 years. Rental for 6 years. Never took depreciation or upkeep/capital improvement expenses on schedule E but always claimed full rent income. Owner wants to avoid capital gains in any way possible but she has no prospective properties for 1031 exchange. So she's researching extensions to 1031 exchange due to covid, self-directed IRA setup, conveying the property into an existing regular 401k before the sale. The issue is the short time period before the closing. Thanks in advance for thoughts on avoiding cap gains!

[Dave Foster]

@Joan MacDonald, If she wants to keep her options open to 1031 and defer that tax she has to have her qualified intermediary in place prior to the closing of the sale.  From that date she has another 45 days to find possible replacement properties.  But if the QI isn't in place at the time of sale her ability to 1031 is done.

The last covid extension expired way over a year ago (I'm losing track of time this has been so tedious).  So there is no opportunity for her to get anything like that.

Best to start the 1031 and then if she can't find a good replacement let the exchange die on day 46 by not turning in a list.  She gets her proceeds back right then and pays the tax when she normally would have.

Another possible option is that if her 45 days expires after 1/1/22 she will get to defer the tax until April of 2023.