Menu

Home › Forums › Closed Forums › Buying and Selling RE › Capital Gains Exclusion Pro Rata Rule for Rental to Residential Conversion

Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • January 14, 2018 at 1:43 PM #22495
    Myriad
    Participant

    Limits To Converting Rental Property Into A Primary Residence To Plan For IRC Section 121 Capital Gains Exclusion

    “In addition to the limitation of Section 121 regarding depreciation recapture, as a part of the Housing Assistance Tax Act of 2008, Congress further limited the exclusion of capital gains for property that was converted from a rental to a primary residence. The new rules, enshrined in IRC Section 121(b)(4), stipulate that the capital gains exclusion is specifically available only for periods during which the property was actually used as a primary residence; any other time (since January 1st, 2009) that the property was not used as a primary residence is deemed “nonqualifying use”. Accordingly, to the extent gains are allocable to periods of nonqualifying use (gains are assumed to be pro-rata over the holding period), those gains are not eligible for the exclusion.”

    Has anyone encountered this?

    January 14, 2018 at 8:00 PM #809003
    SK in CV
    Participant

    Yes. Many people have encountered it.

    January 15, 2018 at 6:20 PM #809014
    Myriad
    Participant

    Just curious, because that’s the first I heard of proration of Section 121. Very few financial planners/accountants seem to mention this rule, so would like some confirmation from the community.

    January 15, 2018 at 8:19 PM #809018
    SK in CV
    Participant

    It exists. It’s very real.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The forum ‘Buying and Selling RE’ is closed to new topics and replies.