The first property was never rented.
Short answer is no. Several things to make you aware of in as much simplicity as I can.
- What you're asking about is referred to as a "1031 exchange". This type of transaction does not negate any tax liability. It only delays it. See https://www.irs.gov/pub/irs-news/fs-08-18.pdf for more information.
- Can only be used for investment/income producing property. Your current property is not used to produce income.
- A 1031 exchange must be handled by a 3rd party intermediary in order to qualify as such under the IRS rules.
- There are time constraints on when the transaction must be completed. Additionally, in some states the state laws on this are "in addition" to federal laws, and can make the process more complex. So the use of an intermediary is a must.
