All Forum Posts by: Monica Seth

Bill, thank you for the suggestions. Appreciate it! We don't own another home. We are renting a single family home and my spouse was going to move back to the condo if it was going to make us eligible for Section 121 exclusion. It doesn't work for our entire family to move back to the condo. Our family has grown and our children would have to change schools if we moved to the condo. So that is not an option.

I understand our only choice is to keep renting the condo currently. I noticed you mentioned If you plan to retire somewhere else , you could sell and do a 1031 exchange for that property. Why would it work to our benefit only if we plan to retire someone else besides California?

Quick question : When we do a 1031 exchange, does it have to be an investment property? Or could it be a primary residence?

Thank you Bill Brandt and Wayne Brooks.  Home prices in CA are at the highest I have seen in the past few years. I was hoping to sell at a higher price now and then later when the prices stabilized wanted to buy a single family home.
Since I am not eligible for the Section 121 exclusion, what would your advice be?

Wayne Brooks - this is what I found on the IRS website. https://www.irs.gov/taxtopics/...

"In general, to qualify for the Section 121 exclusion, you must meet both
the ownership test and the use test. You're eligible for the exclusion
if you have owned and used your home as your main home for a period
aggregating at least two years out of the five years prior to its date
of sale. You can meet the ownership and use tests during different
2-year periods."

Based on this , my understanding is that the 2 years must not be consecutive to qualify.

Hello Wayne Brooks. Thank you for replying. I appreciate your help.

Based on your post,what I understood is that the property should be a primary residence for 60 months continuously before the sale date to qualify for 2 out of 5 year rule for capital gains tax . Did I understand correctly?

I now understand that the exclusion is pro rated by the number of months it was a rental vs the number of months it was a primary residence.

However, could you please clarify if it has to be a primary residence for 2 years continuous immediately prior to the sale date?

Ashish Acharya- Thank you for replying. Appreciate it!

The purchase price was $335,000. Based on current comparables it could sell for $700,000. Depreciation taken from Dec 2017 - April 2021 is $28,887. Our Federal Income Tax Bracket(Married Filing Jointly) is 22%.
Considering we have to prorate the gain between qualified and non-qualified use, could you please help me understand how much capital gains tax would I owe upon sale of this property?

 We have to make a decision if I want to proceed with the sale based on this information or continue to retain it as a rental property going forward. Would greatly appreciate your help.

Thank you in advance forum members. I need clarification on whether the 2-out-of-5-Year Rule would apply in our situation to get full exclusion from capital gains tax.We live in CA and had purchased a condo in Jan 2005. This was our primary residence and we lived there from Jan 2005 until Nov 2017. It was converted it into a rental property from December 2017 - April 2021.Tenant moved out in April. Since tenant lived there for 3 years 5 months ,we are considering moving back into the condo as our primary residence for 5 months and then selling it in October 2021. That way it would be owner occupied for 2 years out of the past 5 years, so we are hoping to get full exclusion on capital gains tax.Is my understanding accurate? Would the 2-out-of-5-Year Rule apply in our situation to get full exclusion from capital gains tax? We don’t own any other primary residence; we are renting a home nearby.

The total depreciation deducted over the 3 years 5 months is $ 28,887. I understand we are liable for depreciation recapture when we sell. Is that a flat 25% or based on our tax bracket?

We are aware of the 1031 exchange and do not want to do an exchange currently.
Thank you!

Thank you in advance forum members. I need clarification on whether the 2-out-of-5-Year Rule would apply in our situation to get full exclusion from capital gains tax.

We live in CA and had purchased a condo in Jan 2005. This was our primary residence and we lived there from Jan 2005 until Nov 2017. It was converted it into a rental property from December 2017 - April 2021.Tenant moved out in April. Since tenant lived there for 3 years 5 months ,we are considering moving back into the condo as our primary residence for 5 months and then selling it in October 2021. That way it would be a primary residence for 2 years out of the past 5 years so we are hoping  to get full exclusion on capital gains tax.Is my understanding accurate? Would the 2-out-of-5-Year Rule apply in our situation to get full exclusion from capital gains tax? We don’t own any other primary residence; we are renting a home nearby.

The total depreciation deducted over the 3 years 5 months is $ 28,887. I understand we are liable for depreciation recapture when we sell. Is that a flat 25% or based on our tax bracket? 

We are aware of the 1031 exchange and do not want to do an exchange currently.
Thank you!

I own a duplex in Pleasanton , TX and am trying to do a refi. However , I am higher than the required 75% LTV that most lenders / banks need - 86.4% LTV. Has anyone had any luck with smaller banks / credit unions to get a refinance in a similar situation ? I have 2 liens and the second is an interest only / balloon mortgage. What are my options ?