Retirement - Avoiding Capital Gains Tax

[Luke Babich]

Hi all BP members, 

My parents currently own an investment property that is fully paid off. They are currently planning for retirement and they would like to sell this property in the coming years. It is not their not primary residence. Since I plan to purchase the property from them and am a licensed realtor, What ways/ strategies are there to avoid the capital gains tax since I would be purchasing as my primary residence?  The property is located in Chicago, IL . 

Thank you all for you advice/input!

Luke 

[Bobby Lee]

First, it's almost never a good idea to buy a house you would otherwise inherit. 

Why do they need to sell the property in retirement? Are they looking to use the cash to buy a new house to live in? Do they just not want to deal with tenant issues?

If they want to buy a home to retire in, then you can buy the home they like and rent it to them. You have the perfect tenants (they're not going to destroy their son's property!) and you capture the depreciation.

If they don't want to deal with tenants anymore, then they can hire you as their property manager & tenant. You'd be doing the same anyway if you purchased he property from them. They get less headache, nobody pays capital gains, and you can mutually decide how much you get paid as property manager and how much rent should be depending on whether they want to give you money (property manager fees) or you want to supplement their retirement (rent), and you get the property when they pass on.