We purchased this property by getting a loan in the amount of $136569.87 against a rental property we had that was already paid for. The land we purchased cost us $122197.41. Plus $1000.00 earnest money to hold the property. We also paid $6576.95 for the cost of subdividing the land. For instance survey, platting, drainage study, legal fees, restrictions changes, marking lots and tax certifications. We purchased in our personal name on 2/24/2017 but moved the land into a LLC we formed on 6/19/2017. We sold two lots in January 2018. What can we do in order to keep from paying the capital gains next year? Also are we considered a real estate professional? We both have full time jobs that aren't involved in real estate.
If you both have full-time jobs, then you most likely aren't considered real estate professionals.
This, from 2017 Instructions for Schedule E (rental and Royalty Properties):
You were a real estate professional for the year only if you met both of the following conditions.
- More than half of the personal services you performed in trades or businesses during the year were performed in real property trades or businesses in which you materially participated.
- You performed more than 750 hours of services during the year in real property trades or businesses in which you materially participated.
If you are married filing jointly, either you or your spouse must meet both of the above conditions without taking into account services performed by the other spouse.