Building house in one state and moving to another state - taxable or not if sold on completion?

My question is: US-specific


I am in the process of having a home built buy a local builder in AZ. There
is only a couple of weeks until the closing date and I have decided to go
into business with a partner but we would plan on moving the business to TN
due to land costs. I am currently renting an appartment since i sold my
previous home of seven years. I own no other residences and "planned" for
this to be my primary home. Will I be able to avoid capital gains if I just
flip the home and move to TN? Thanks!

david ingram replies:

The answer is no.

The US allows you to make up to $250,000 per individual on the sale of your
principal residence.

To qualify, however you have to live in it for 24 months.

There is a provision which allows you to move earlier for extenuating
circumstances such as a job transfer, death of a spouse, birth of triplets,

Moving to another state or start a business would or should be a reason as
well although, I, personally have not seen it used. However, the tax free
portion is reduced on a pro-rata basis determined by the number of months
you were actually physically in the house. Therefore, is 24 months is
$250,000, 6 months would be 6/24 x's $250,000 or $62,500. If you have not
actually lived in the house, there is nothing to divide by an d the whole
house is subject to at least short term capital gains tax at best and
possibly straight income if the IRS got the idea that maybe you had built
the house as a spec house for resale. They usually get that idea by looking
at mortgage applications where the individual tell s the mortgage company
that the house will be sold.


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