Posted on: 13th Mar, 2007 06:03 am
I am the owner of a single-family rental house and two-family rental duplex. I want to sell the duplex and pay off a part of the outstanding balance on the mortgage that I had taken against the rental house (single family). Can I invest the sale proceeds of the rental duplex to pay down the mortgage balance without owning any tax on capital gains.
Anaida Williams,
Capital gain taxes will have to be paid only if a profit is made on sale of the duplex, i.e., the value you receive from the sale is more than the present market value of the duplex.
Trelease
Capital gain taxes will have to be paid only if a profit is made on sale of the duplex, i.e., the value you receive from the sale is more than the present market value of the duplex.
Trelease
Hi Anaida,
Welcome to Mortgagefit forum.
Even if a profit is made you need not pay capital gains tax if the amount of profit made is within the allowed capital gains tax exclusion limit of $250,000.
You can read more about how this is possible from this following page - http://www.mortgagefit.com/know-how/capitalgainstax.html
Colin
Welcome to Mortgagefit forum.
Even if a profit is made you need not pay capital gains tax if the amount of profit made is within the allowed capital gains tax exclusion limit of $250,000.
You can read more about how this is possible from this following page - http://www.mortgagefit.com/know-how/capitalgainstax.html
Colin
"Can I invest the sale proceeds of the rental duplex to pay down the mortgage balance without owning any tax on capital gains."
You won't owe any taxes by investing the sale proceeds from the sale to pay down the mortgage, but would have to pay tax if there is a profit made from the sale and that profit exceeds the allowed exemption limit that is set for capital gains.
Coplien
You won't owe any taxes by investing the sale proceeds from the sale to pay down the mortgage, but would have to pay tax if there is a profit made from the sale and that profit exceeds the allowed exemption limit that is set for capital gains.
Coplien
Hi Anaida,
You will have to pay capital gains tax.
You could have avoided the tax payment had it been a 1031 exchange. But using sale proceeds of the rental duplex to pay off home loan on your own rental property will not be considered as tax-deferred exchange under Internal Revenue Code 1031.
In order to make the transaction a 1031 exchange, you need to sell investment property such as rental duplex and purchase a replacement property used for the same purpose of investment. The new property should have equal or higher purchase price compared to the property sold.
Thanks,
Caron.
You will have to pay capital gains tax.
You could have avoided the tax payment had it been a 1031 exchange. But using sale proceeds of the rental duplex to pay off home loan on your own rental property will not be considered as tax-deferred exchange under Internal Revenue Code 1031.
In order to make the transaction a 1031 exchange, you need to sell investment property such as rental duplex and purchase a replacement property used for the same purpose of investment. The new property should have equal or higher purchase price compared to the property sold.
Thanks,
Caron.