Can I defer gain on my home sale by buying a more expensive home?

February 28, 2006


Subject:  Selling my Condo
From:  Johan
Date:  Thu, 26 Jan 2006

I bought my condo for $90,000 and am selling it for $99,000. The problem is we want to close the sale on February 17, 2006 and bought the house on February 27, 2004. We would fail the two-year test. We are buying another home for $290,000, and the closing for the purchase is also scheduled for February 17, 2006.

Will we have to pay a capital gains tax, even though we are buying another property? Both are primary residences.

Answer

Date:  Mon, 06 Feb 2006

Hello Johan,

The old rule of deferring a gain by buying a more expensive residence was repealed in 1997.

Unless you can change the closing date or come up with a good "unforeseen circumstance" for a partial exclusion, the gain will be taxable.

Good luck!
Mike Gray

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