Agent

How can I avoid tax on rental property sale?

1031 exchange rules explained

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DEAR BOB: My husband and I purchased a rental property some years ago. We only have seven years left on the mortgage payments. But we are pondering selling. How will we be affected by capital gains taxes? Can we reinvest the equity earned and avoid the tax? – Delmayne C. DEAR DELMAYNE: Congratulations on your profitable rental property investment. You have probably enjoyed the depreciation tax shelter over many years. Purchase Bob Bruss reports online. But the only way to avoid capital gains tax on the sale of your rental property is to make an Internal Revenue Code 1031 tax-deferred exchange for another property to be held for investment or use in a trade or business. The acquired property cannot be your personal residence. However, you can later convert it into your personal residence. Most tax advisers suggest waiting 6 to 12 months to show rental intent at the time of the trade. But IRC 1031 doesn't specify any rule for minimum conversion time. To qualify for a tax-deferred ...