Mr.Ingram: I believe the tax rate is the same for short term capital gains and regular income (other than earned income which is also subject to FICA) here in the US so it would't matter in this case. However, if the writer had a loss, he would be subject to a limitation of being able to write off more than $3000 against his other income unless he had offsetting gains. Also, since it appears this person is not a realestate professional is is unlikely the IRS world allow him to claim his gain/loss any place other than the capital gains schedule. ---------------- david ingram replies: I seem to see more of the IRS imposing business income on short term real estate sales then anyone else. I agree that the tax rate is the same on short term and business income but on a $20,000 profit as an example, the FICA would be an extra $2,800, a significant difference. Where the IRS finds the items is when they look at the financing and find that the person who was "building his own home" put "in writing" that he was going to sell the house when finished. Or, an irate spouse or friend turns them in. Thanks for the comment though. I learn more from this Q & A forum than anyone else does. -------------- Original message from centapede at lists.centa.com: -------------- > My question is: US-specific > > QUESTION: Hi, > > 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 "plnned" 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, > etc. > > 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 and 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 tells the mortgage company > that the house will be sold. > > David Ingram's US/Canada Services > US / Canada / Mexico tax, Immigration and working Visa Specialists > US / Canada Real Estate Specialists > Home office at: > 4466 Prospect Road > North Vancouver, BC, CANADA, V7N 3L7 > Cell (604) 657-8451 - > (604) 980-0321 Fax (604) 980-0325 > > Calls welcomed from 10 AM to 10 PM 7 days a week (please do not fax or phone > outside of those hours as this isa home office) > > email to taxman at centa.com > www.centa.com www.david-ingram.com > > > Disclaimer: This question has been answered without detailed information or > consultation and is to be regarded only as general comment. Nothing in > this message is or should be construed as advice in any particular > circumstances. No contract exists between the reader and the author and any > and all non-contractual duties are expressly denied. All readers should > obtain formal advice from a competent and appropriately qualified legal > practitioner or tax specialist in connection with personal or business > affairs such as at www.centa.com . If you forward > this message, this disclaimer must be included." > > Be ALERT, the world needs more "lerts" > > This fro "ask an income tax and immigration expert" from www.centa.com > or www.jurock.com or > www.featureweb.com . 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CEN-TA Cross Border Services - Tax, Visas, Immigration
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