DEAR BOB: My sister, brother and I have owned a family home for about 15 years. I lived there until July 2003, so I am eligible for the $250,000 principal residence sale tax exemption. The house has been for sale about a year with no offers. We are thinking of demolishing it and rebuilding with two condos, which would then be sold. Would I still be able to take advantage of the $250,000 exemption on the sale of the condos, as I am on the original house? – Theresa L.
DEAR THERESA: No, you would not be eligible. The reason is Internal Revenue Code 121 applies only to the sale of your principal residence where you have resided an aggregate 24 of the 60 months before its sale.
Purchase Bob Bruss reports online.
Tearing down the house and building two condos would forfeit your $250,000 exemption because the condos were not your principal residence for the required two of the last five years before sale.
When a home doesn’t sell within a year, something is seriously wrong. The primary reason a house or condo doesn’t sell within a reasonable time is usually because it is overpriced.
2004 was a record volume year for home sales. If your house didn’t sell in this superb home sales market, you’re doing something wrong. There is a buyer for every home, but at the buyer’s price and the buyer’s terms.
Do you have it listed for sale with the area’s most successful Realtor? If not, why not? If you are trying to sell the home alone without a professional realty agent, that is the major reason why the home isn’t selling.
If you really want to get that house sold, get it listed for sale with the area’s best Realtor at its fair market value so it will receive maximum market exposure, especially through the local multiple listing service (MLS, and on the Internet at Realtor.com.
NEW BOOK ABOUT INVESTING IN PROPERTY TAX LIENS
DEAR BOB: I am interested in investing in property tax liens. Are they worth buying? What are the pitfalls? Are there any good information sources on how to avoid mistakes? – Mark G.
DEAR MARK: You are very fortunate that there is an excellent brand new book on this profitable topic. The new book is “Profit by Investing in Real Estate Tax Liens” by attorney Larry B. Loftis.
This superb book includes property tax lien investing details for all states, including lots of personal examples from the author. It is available in stock or by special order at local bookstores, public libraries and www.amazon.com.
YOU CAN’T TRADE FOR PROPERTY YOU ALREADY OWN
DEAR BOB: If I build on a property I own in California before I sell my current home, can I trade up and take advantage of that IRC 1031 tax-deferred exchange rule to avoid capital gains tax on the sale of my home? – Sammy R.
DEAR SAMMY: No. You can’t make an Internal Revenue Code 1031 tax-deferred exchange for real estate you already own.
But there is no need for you to make a trade. If you want to sell your current principal residence home, if you owned and lived in it at least 24 of the 60 months before its sale, Internal Revenue Code 121 allows you to claim up to $250,000 tax-free profits (up to $500,000 if you are married with a spouse who also meets this time test).
More details are in my new special report, “Everything Homeowners Need to Know About the New $250,000 and $500,000 Home Sale Tax Exemption Rules,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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