title>Tax Guru-Ker$tetter Letter Wizard Animation

                 

Tax Guru-Ker$tetter Letter
Monday, March 21, 2005
 
Selling Mixed Use Property

Q:

Hello,

 I bought my property two years ago and I live there ie. it is my primary residence, however I have been renting out two rooms in the house. If I sell now that it has been two years later, do I still have to pay taxes when I sell the house? I have been claiming rental income on the house.

 Thanks,

 

A:

What you have is a sale of mixed-use property; part personal and part rental.

The sales price and cost basis will have to be allocated between the two types of property, generally based on what you have been showing on the depreciation schedule for the rental portion.

The gain from the primary residence portion would be eligible for the up to $250,000 of tax free profit.

The gain from the rental portion would be taxable unless you set that portion of the sale up as a 1031 exchange, under which you would have to reinvest the proceeds into new business, investment or rental property within 180 days via the services of an exchange accommodator.

You definitely need to be working with a tax pro in setting up the best strategy for you.

Good luck.

Kerry Kerstetter

 

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- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/21/2005 06:13:00 PM Send this post:

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