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As mentioned above, it's not clear when they tore down the old house.
Quote: "In 1996, the couple wanted to enlarge and remodel the original house, but due to stricter building and permit restrictions since the house was originally constructed, they chose to demolish the original house and in 1999 constructed a new three-bedroom house on the same property."
Further, the article you linked said that they NEVER occupied the new house. My guess is that they tore down the old house in 1996 and lived elsewhere while the new house was being built. Then they sold the new house in 2000 without ever living in it.
I'm sorry, I'm a bit confused by your reply. You speak of trailer being my primary (its maybe a $5000 towable travel trailer) but you also speak of the structure of the home being primary. The house wont be completed for a week so in your opinion does the 1 year we lived on the property (in trailer) count towards the 2 years as that we had no other residence.
No, it does not count towards your 2-year time frame. At least not according to the IRS--which is the only opinion that matters.
Quote:
Originally Posted by L00k4ward
If you bought the land and build a home - improvements- which increases your costs basis - you could count the day when you moved to the property - mobile - as your primary residence -when you started mail delivery, drivers license address, utility bills, banking, etc.
THIS IS INCORRECT!
Quote:
Originally Posted by lpranger467
A RE agent said it would be short term gains if I sold before 2 years (r if I stayed 2 then got ruled against). What percentage is short term gains ?
Short-term capital gains are less than one year. Any capital asset held longer than one year is a long-term capital gain.
In your previous thread I had posted (post #228) about the same case that mathjak has mentioned in this thread. In that case, the IRS was quite clear that the 2-year time frame begins when you actually move into the residence which has been constructed. It does not count when you live on the property in another structure, which would include a travel trailer.
I interpret it differently. It's the LAND that establishes your residence. It doesn't matter if you're living in a tent, a motor home, or an 8 BR mansion. If you're on that property that you own and use as your "principal residence" for 2 of the 5 years, then you've met the requirements.
As I think I mentioned in the previous thread, it's your "intent" as established by your voter's registration, driver's license, automobile registration, IRS tax records, etc that matters.
You are confusing establishing a primary home state or locality with the irs section 21 tax laws.
They have different rules for different purposes.
Section 121 requires it be the same structure not just in the same spot.
Last edited by mathjak107; 01-04-2023 at 02:56 AM..
As mentioned above, it's not clear when they tore down the old house.
Quote: "In 1996, the couple wanted to enlarge and remodel the original house, but due to stricter building and permit restrictions since the house was originally constructed, they chose to demolish the original house and in 1999 constructed a new three-bedroom house on the same property."
Further, the article you linked said that they NEVER occupied the new house. My guess is that they tore down the old house in 1996 and lived elsewhere while the new house was being built. Then they sold the new house in 2000 without ever living in it.
Again , they were trying to use accrued time living on the land which was clearly in the five year time frame to Apply to the new house ….no good , different structure ….land does not count as anyone can own the land a house is on .
In fact as you see in that case even being the same address didn’t qualify the new structure as a continuation of the old
It is it being the same structure that matters
Last edited by mathjak107; 01-04-2023 at 02:55 AM..
Moving in next week with temporary certificate f occupancy. If your information is correct and this last 13 months hasnt ****ed I assume the 2 year mark would start next week as that I'm moving into it *even with temporary CO) ?
I did speak to a RE agent about maybe if I sold in spring/summer that the season price hike would make up for some of the tax hit I would take.
In my case would the taxes on anything I make over $250,000 (what I came into it with) be taxed at 20% ?
Quote:
Originally Posted by jackmichigan
In your previous thread I had posted (post #228) about the same case that mathjak has mentioned in this thread. In that case, the IRS was quite clear that the 2-year time frame begins when you actually move into the residence which has been constructed. It does not count when you live on the property in another structure, which would include a travel trailer.
Oh boy. Why do tax laws need to be so complicated? State and federal.
I foresee a new upcoming dilemma with states which are encouraging building of ADUs accessory dwelling units on your property to help with housing availability.
Imagine you are a single person, build an ADU, and move into it yourself. Then you rent out the main house to help with expenses but still hope the property appreciates. Same land, shared address. Does this work toward your 2 yrs exclusion? What if you keep your old furniture in the rental? I’m glad some of you can figure this out, but the average person has a tough time.
Moving in next week with temporary certificate f occupancy. If your information is correct and this last 13 months hasnt ****ed I assume the 2 year mark would start next week as that I'm moving into it *even with temporary CO) ?
Correct. Once you actually move into the residence your 2-year clock will start ticking.
Quote:
Originally Posted by lpranger467
I did speak to a RE agent about maybe if I sold in spring/summer that the season price hike would make up for some of the tax hit I would take.
In my case would the taxes on anything I make over $250,000 (what I came into it with) be taxed at 20% ?
The $250,000 profit from the sale of your last house has nothing to do with it. That's yours to keep and you don't need to factor that into your purchase price for this house (land plus cost of construction).
Your basis will be the cost of the land plus your costs in building the house. Make sure to include any incidental closing costs to the $625,000 cost of the land (not including prorated taxes).
Hopefully you have been keeping good track of all of your expenses for the construction, including permit fees and such. If your costs to build are, say, $275,000, then your basis would be $900,000. If you sell this spring, any net price above $900,000 would be taxed as ordinary income. If you waited until next spring, then you would be taxed at the long-term capital gains tax rate. If you wait one more year, you and your wife would have a $500,000 exclusion which would exempt that amount from federal income taxes.
No, it does not count towards your 2-year time frame. At least not according to the IRS--which is the only opinion that matters.
THIS IS INCORRECT!
Please, provide a link where the IRS is saying that living on the property which is a primary residence in mobile home “wouldn’t count if you moved on the same primary residence property from mobile to a newly built house”
We all need to learn from your extensive knowledge - I couldn’t find it anywhere in IRS publications - including the one Mathjack was referring to tax code 121 - I think he mistakenly called 21? -
Appreciate anything you can definitely quote from IRS - that is only what matters - according to you.
Not some sensational article by “tax advisor” website which is missing crucial details. Written by a “freelance college student arts major? - as it often happens …-just a speculation on my part as it doesn’t sound very professional - with missing crucial information
It may help a lot of people - clarity is essential.
My understanding - the key here is “primary residence and time duration” then and only then it comes to the costs basis - which is easily established
Last edited by L00k4ward; 01-04-2023 at 07:08 AM..
Again , they were trying to use accrued time living on the land which was clearly in the five year time frame to Apply to the new house ….no good , different structure ….land does not count as anyone can own the land a house is on .
In fact as you see in that case even being the same address didn’t qualify the new structure as a continuation of the old
It is it being the same structure that matters
Which part of 26 USC 121 and 26 CFR 1.121.1 specify that it's the structure that counts, and that building a new structure restarts the clock?
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