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- This topic has 35 replies, 10 voices, and was last updated 11 years, 8 months ago by Anonymous.
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March 11, 2013 at 7:29 PM #760559March 12, 2013 at 7:19 AM #760575MayzeParticipant
Is there any way to keep the capital gains tax exemption on a primary if you convert? Or is this just another cost?
March 12, 2013 at 7:49 AM #760576SD RealtorParticipantCap gains exemption is very clear. You must have occupied it 2 of the last 5 years. However losing a cap gains exemption in exchange for the tax benefits of income property is a fair trade. I would not let that stop me.
March 12, 2013 at 9:37 AM #760581spdrunParticipantThe way to do it is clear, just not legal. Keep “living” in the unit…
March 12, 2013 at 10:18 AM #760583SD RealtorParticipantNo the way to do it is to do what is best for you. For most people including myself, breaking the law or risking an audit is not the preferred way to make money.
March 12, 2013 at 10:24 AM #760584southern5footerParticipantBecause all the cash we are willing/able to invest in real estate is tied up in that house.
March 12, 2013 at 10:31 AM #760586spdrunParticipantNo the way to do it is to do what is best for you. For most people including myself, breaking the law or risking an audit is not the preferred way to make money.
If you picked up mail there regularly and rented another place, who would be the wiser?
March 12, 2013 at 10:35 AM #760587SD RealtorParticipantI understand southern5. For some people it works, and for others it does not.
March 12, 2013 at 10:37 AM #760588SD RealtorParticipantI do not debate the ease of breaking laws or tax codes, nor do I give advice to do so. If it works for you great. If it works for others great. It doesn’t work for me nor would I advise people to do it.
March 12, 2013 at 10:39 AM #760589spdrunParticipantNot advising anything, but the possibility exists. And probably wouldn’t look unKosher assuming that he didn’t buy another place that could be construed as a primary.
March 12, 2013 at 10:53 AM #760590SD RealtorParticipantsounds fantastic. why don’t u take a poll to see how many property owners have pursued that unique strategy. really i am sure plenty have done so.
March 13, 2013 at 9:09 AM #760603(former)FormerSanDieganParticipant[quote=spdrun]The way to do it is clear, just not legal. Keep “living” in the unit…[/quote]
Independent of the legality, treating the rental as a primary may or may not be beneficial.
It depends on your ultimate goals for the property.
If you are going to hold for your lifetime to provide retirement income and pass to your children it makes no sense to continue to treat it as a personal residence for a future tax break on the sale that your heirs would get anyway.
One of the advantages to rental real estate is having the potential for tax sheltered income due to paper losses.
Here are some issues:
1. You cannot depreciate the property or upgrades
2. You cannot deduct insurance, maintenance, utilities between tenants, advertising costs.
3. Limitation on tax deductible interest to $1 Mil.
(If you have two $600k loans you can’t deduct the full amount.
4. AMT limitations on the property tax deductibility.There are probably a lot of other issues to consider.
Not saying that it’s better to treat as a rental for all cases. But there are plenty of scenarios where cheating and treating as a primary may not even pencil out.
April 18, 2013 at 5:09 PM #761380AnonymousGuestAny idea what’s going on with 13127 Decant Drive? The MLS shows that the listing expired last September at $560K. The listing agent told me today that it’s been on the market for a month in the range of $699-799K. Why is it not showing up on the MLS? What’s up with the pricing? Recent comps are $100K less!
April 18, 2013 at 6:10 PM #761384SD RealtorParticipantDon’t know what to tell you. Did not see it as an active listing either, only as expired like you did. As much as the market is on fire right now they are on crack if they think they will get that much for that home. When an agent takes a listing they can get an exception and not post it on the MLS but the seller must know and authorize that, which is a stupid thing to do. Call the listing agent again and ask them why the home is not posted on the MLS.
April 18, 2013 at 6:34 PM #761385AnonymousGuestThe listing agent made it sound like it was my mistake. She was quite rude about it.
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