Zoey, Home Seller in Shawnee, KS

My wife and I purchased the house we are living in one year ago (almost to the day). It was a foreclosure, and we bought it for close to 60k less

Asked by Zoey, Shawnee, KS Tue Dec 15, 2009

than the county assessment. We have made substantial improvements to the house and are ready for a new challenge. If we sell, are we subject to capital gains taxes? I have heard that if you put the money into a new property the money is exempt, is this true?

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Jennifer Go…, Agent, Shawnee, KS
Mon Sep 3, 2012
You really need to speak with an accountant to review your situation
0 votes
James Gordon…, Agent, Hamilton, OH
Wed Dec 16, 2009
If you wait another year you should not have to worry about the taxes as if you live in the home 2 years you and your wife would have a 500,000 exclusion on prodit on the home. Any repairs or upgrades that you do to the home can be added to the basis value to determine your profit. Here is a link to the IRS summer fact letter.
Web Reference:  http://www.Find1Home.com
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Ben Edsall, Agent, Kansas City, MO
Tue Dec 15, 2009
What you are talking about is possibly a 1031 exchange, but that does not necessarily apply to your personal home.

There are exemptions for first time sales, and other situations.

If this is your primary residence and you are looking to purchase another home to live in, the tax penalties will not likely apply.

D. Ben Edsall
Turn-Key Properties LLC
0 votes
M. King, , Greenville, SC
Tue Dec 15, 2009
I believe if you reinvest the proceed within 6 months you do not owe cap gains - check with a tax accountant.
0 votes
Aaron Sewell, Agent, Emporia, KS
Tue Dec 15, 2009
Check with your accountant but it is likely you have not lived in your home long enough to be exempt from capital gains. A primary res. typically does not qualify for a 1031 exchange.

No one likes to give their hard earned money to the government but if you can hit a home run by selling for a huge profit in such a short time why wouldn't you? Turn around and buy a bigger and better foreclosed home well under the current market and do it all over again. There are a lot of deals to be had out there, especially if you have the cash!
0 votes
Al Akerman, Mortgage Broker Or Lender, Lakewood, NJ
Tue Dec 15, 2009
Please speak to your tax pro.

I believe you are referring to a 1031 exchange-where you sell one property and use the proceeds of the sale to purchase a new property and don't pay capital gains.

As far as I know, a 1031 can only be done with investment properties. A primary residence can not be used for a 1031 unless you converted it to an investment property for at least one year and one day prior to selling it.

There may be a much better solution for you though.

I am not sure if you are aware, but a married couple may sell a house that they own as a primary residence and be tax exempt for up to $500k in gains (for a single person that number would be $250k) if they lived in that home for two of the last five years.

I realize that you mentioned that you bought the house only one year ago. I guess it may be difficult for you to wait out the year, but if you can the capital gains would be tax exempt.

This would be much simpler than a 1031 anyway, for many reasons including the fact that 1031's are very complicated and can get messed up very easily.

I hope this helps.

Good luck.

Good luck.
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