Capital Gains

[Coot]

If you take capital out of real estate, as in sell the property, is it possible to reinvest it in stocks or bonds in such a way as to avoid the capital gains hit? If so, what are the conditions?

[ethics]

I thought that Capital Gains with Real Estate was thrown out with the Taxpayer Relief Act of 1997?

[Steve]

Maximum $500,000 per married couple, you have to have lived in the house as your primary residence for two years - no capital gains tax.

Commercial real estate, I don't know.

[tke711]

What Steve said. ;)

Also, because one can do this every two years now, there is no longer the ability to "re-invest" the money as a way to avoid the taxes like there was back when you only got a once-in-your-life exemption.

If it's over the $500,000 mark, you will have to pay capital gains on the amount over.

[Coot]

If it's over the $500,000 mark, you will have to pay capital gains on the amount over.
That's what I was hoping to avoid. Thanks for the answers.

[tke711]

Remember, when figuring out your actual capital gains, you get to subract the money you put into the property. Of course, not everything counts, but if you put on a new roof, put in a new air conditioner, etc., they can all be subtracted to come up with the true capital gain.

Example:
$600,000 - selling price of the home
-
$100,000 - original purchase price of house
$20,000 - misc. home improvements
=
$480,000 capital gain which is under the $500,000 mark.

[cdw]

I believe as a single person it's $250K, married $500K. The only way around it is when investing (meaning you are an investor, it's not a primary residence) to roll over into a 1031 holding and invest in a like property. While you still eventually end up paying tax at some point, (when you turn it into cash) all of your expenses come out of it before the gain is realized. Commercial (meaning corporate) is completely different. But, as a private investor into commercial property, the 1031 rule would still apply.