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Updated almost 7 years ago on . Most recent reply
What would you do with this case?
Hi guys,
I'm trying to help a relative here and I need your insight.
She bought her house for 70k in the 70s, now the area is well sought after in SM and it's worth north of 3.2MIL....it was never rented and now that she wants to sell...we found out that there will be a 32% capital gain tax...after deducting the 250k (single) + 70k (original price)+ 90k (renovations)...she will have to pay a little above 900k in taxes and wont be able to get a house for 2.5MIL that she liked.
We were told that she is not qualified for the 1031 exchange, since the house was never rented before. Other than that she does have other rental properties...what would you guys in this case?
Thank you!!!
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#5 Personal Finance Contributor
- Financial Advisor
- Boynton Beach, FL
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#5 Personal Finance Contributor
- Financial Advisor
- Boynton Beach, FL
@Ouman You Wow. That is some appreciation! A 1031 is out of the question because it is not an investment property. The best option would be to consider a Monetized Installment Sale. This is a way to structure your sale so that you get cash at closing and you can defer the capital gains tax and depreciation recapture for 30 years. This sales structure is pretty common in CA where property values have appreciated as you've described.