Deep in the folds of the recently signed American Jobs Creation Act of 2004 – the same law that will allow residents of the seven states that don't levy a state income tax to deduct sales taxes from their federal income tax in 2004 and 2005 – is a subtle yet important change for homeowners who have acquired their principal residence via a tax-deferred exchange. The new law, signed by President Bush last month, includes a stipulation that the exchange property must be held for five years in order to qualify for the $500,000 ($250,000 for a single person) principal-residence tax-free exemption. "It may be disguised as a safe harbor for people who buy an investment property, rent it out for three years, then live in it for two years before selling it," said Kelly Yates, attorney...
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