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Hi, is it true that if you sell property that you have 2 years 2 report it to the IRS?

October 16th, 2009 | | | 5 Comments | |

coinsandgrpahs

so that u can re-invest it in other property or do u have to report it that year? thanks

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5 Responses to “Hi, is it true that if you sell property that you have 2 years 2 report it to the IRS?”

  1. Randall Parker, MBA Says:
     October 16th, 2009 at 1:02 am

    You need to report the sale on your 1040 in the year that you sold it. I believe that you are referring to how long you have to take your personal gain and roll it into another owner-occupied property.

    The rules on this change from time-to-time, but if you lived in the property as your primary residence for two out of the last five years, subject to some restrictions, you have an exemption of $250K if single, or $500K if married, against the gain on the property. You can only claim this exemption every two years, so if you had a property that was your home for two years, kept it as a rental, and lived in another home for two years, and then sold both homes in the same year, you would only get one exemption.

    You used to be able to roll the gain from the other property into a new one within two years, but that was replaced by the new exclusion.

    I hope this helps. If you need more information, speak to a tax professional in your area. Good luck!

    ** Nothing stated herein is intended as accounting, legal, or tax advice. Should you need help in these areas, seek the guidance of a licensed professional in your area. No warranty, gurantee, or other representation is offered or attaches with this information. Use this information at your own risk. **

  2. Judy Says:
     October 16th, 2009 at 1:02 am

    No, not true.

    There are somewhat different rules regarding reinvestment, depending on whether it’s investment property or your personal home. For a personal home, any rule about reinvesting the proceeds has been gone for many years.

  3. bostonianinmo Says:
     October 16th, 2009 at 1:02 am

    No, that is not true. You must report it in the year of the sale. While it’s possible to do a Section 1031 exchange of income producing property that will only defer the tax on the gain. But once you sell the property outright it’s too late to do a 1031 exchange so any tax becomes due immediately.

    And if it’s the sale of your personal residence and you don’t qualify for the exclusion on the sale of your principal residence then there’s no way to defer the tax. The old rollover replacement rule was discarded over a decade ago.

  4. Sharon T Says:
     October 16th, 2009 at 1:02 am

    Absolutely not! If you sell property in 2007, you report the sale on your 2007 return.

    You do not have 2 years to replace property by buying others (except under certainly very limited conditions such as condemnation by a governmental entity and certain casualty situations).

  5. v b Says:
     October 16th, 2009 at 1:02 am

    The 2 years only applies to "Involuntary conversions" such as owning a house in New Orleans when Katrina hit.

    If you CHOOSE to sell your property and you have a gain, it’s reported that same year. If you have owned the property for a year or less, it’s taxed at your marginal tax rate. (More income can put you in a higher tax bracket.) If you have owned the property for a year and a day or more, it’s taxed at 15% (unless it’s depreciation gain).

    Like kind exchanges can postpone the gain, but this is only supported for non-personal property (not your house or car) and requires that you actually trade for another property.

    Many, many years ago, you could sell your home and reinvest the money and postpone paying the taxes–that rule changed in 1997 and people are still asking about it 10 years later!

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