Land/home Sale

[Bettie Cheek]

Taxpayer has lived in his current residence for 15 years, bought a piece of land and had the plans drawn up to build on. He since sold the land and house plans and purchase a new home while still retaining the old home which he will sell later. He is determined that he can roll the gain into the new home and I cannot find anywhere that this is true so guess I will lose a client unless someone has better insight into this

[Bill Tubbs]

Law change

Tell him the law changed. If you can find something on the IRS webpage to show him, even better.

If he's still adament, let him walk.

Bill

Edit: Looks like I'm eating crow today... 2nd thread that I misread something. I had interpreted it to be that he was selling the home, but now when I read it again it looks like he's selling other property. If it was an investment property, he may be able to 1031 it (provided of course he had set that up before selling the old). But, it doesn't look like it could have been considered investment property at all, so that's moot. Back to personal -- calculate the gain and report it -- or let the client walk.

[Matt Sova]

Never changed

The law has ALWAYS (well as long as I've been around) been the same on personal use property. He purchased a vacant lot and never constructed his residence there. The land was then sold and he took the cash. That is a gain pure and simple.

Now, assume the facts are different. Assume he wrote off the interest (if any) on this property as investment interest expense. Assume he went to a 3rd party admin to do a 1031 exchange. Assume the new property was identified in 45 days of sale and closed on within 180 days of sale. Assume the new piece of property is investment property as well. THEN and only then can he roll the gain over. But that is not the case here at all.

Under the pre-May 1997 gain on residence law I had a lot of people that thought they could roll the gain on any type of real estate (vacant, rentals, etc) just like you used to do with you personal residence. Then they'd get mad at me for their own stupidity. Gotta love their kill the messenger mentality.