Sale and Purchase of Home

[Terraitup]

I am using Turbo Tax Deluxe, I sold my home in 2021 but I purchased 2 replacement homes after I sold my home, yet Turbo Tax is saying I have capital gains. Why am I unable to input the purchase of my new homes? 

[Anonymous_ · Accepted solution]

If you are making some sort of attempt to report this transaction as a like-kind exchange, it will not work unless you followed the procedures outline in the Code (and then enter the transaction accordingly in TurboTax).

Section 1031 and the regulations promulgated thereunder have strict requirements.

See https://www.irs.gov/instructions/i8824#en_US_2021_publink12597kd0e140

[rjs]

The law that allowed you to defer capital gain on your home if you purchased a new home within two years was eliminated in 1997. There is no place to enter the purchase of a new home because the purchase has no effect on your taxes.

The old law was replaced by the Section 121 exclusion of gain on the sale of your home. See the following link on the IRS web site for some basic information about the exclusion of gain.

Topic No. 701 Sale of Your Home

See IRS Publication 523, Selling Your Home, for all the details of the exclusion. When you entered the sale of your home in TurboTax, TurboTax would have asked some questions to determine whether you qualified for the exclusion of gain. It has nothing to do with purchasing a new home.

You cannot do a Section 1031 like-kind exchange on your personal home. A like-kind exchange is only for property used for business or investment.

[pk]

@Terraitup  while agreeing with @Anonymous_  and @rjs  on what you cannot do ( and indeed answers your question ), all is not lost.  The old law was replaced  with I would think a more beneficial one .

Now when you sell your main residence -- 1. if you ( at least one of you in case of filing joint filer ) have owned this property for two years;  2.  you  ( both of you in case of joint filers ) have used this property as your main residence/ home for a total of 730 days  in the last 5 years ( from the date of sale )  --- you can exclude ( from federal taxes ) gains of  up to  250,000 ( 500,000 for joint filers ) .  You are allowed to have this exclusion once every two years ( + one day ).

Once you tell TurboTax that  you have sold  your main  residence, it should walk you through the process and make this  exclusion  available.

Is there more I can do for you ?

[bentriviani]

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@Anonymous_ wrote:

If you are making some sort of attempt to report this transaction as a like-kind exchange, it will not work unless you followed the procedures outline in the Code (and then enter the transaction accordingly in TurboTax).

Section 1031 and the regulations promulgated thereunder have strict requirements.

See https://www.irs.gov/instructions/i8824#consumer-credit-status-in-the-european-union-has-it-changed-in-recent-years 

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thank you very much for your help!

[pk]

@bentriviani , whereas I absolutely agree with your statement about 1031 "like kind exchange" -- but I am lost as to the applicability  to this post.

I am assuming that the poster sole his residence and bought two properties, intending to use at least one as his residence.  My assumption is because 1031 exchange is possible ONLY for income properties  i.e. it is business transaction wherein  one or more assets are given up and one or more similar assets  are acquired as replacement for the relinquished asset(s). 

It is possible that I am wrong and the poster is indeed trying to do a 1031 exchange  with or without the help of a Qualified Intermediary (QI).

If I am wrong please pardon 

pk

[Mike9241]

the law that allowed deferring of gain on sale of personal residence by purchasing a new home was eliminated a long time ago.  if your original home was strictly a personal residence it does not qualify for a 1031 exchange.  a personal residence own and occupod for any 2 years out of the 5 years before the sale would qualify for an exclusion of $250,000 if you are single or $500,000 if both you and your spouse occupied the home for 2 years out of the 5 years. either or both could own the home.

[Anonymous_]

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@pk wrote:

@bentriviani , whereas I absolutely agree with your statement about 1031 "like kind exchange" -- but I am lost as to the applicability  to this post.

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@pk: @bentriviani's response included my first response in this thread. The quoted language is mine, not @bentriviani's.

Regardless, this has seemingly been resolved at this point.