Asked by ConfusedFirstTimer, Los Angeles, CA • Wed Mar 20, 2013
I have been in a very long process of buying a short sale townhouse in CA. It's been going on for 6 months and we hope to finally close in the next 30-45 days. However, I might now move from CA to TX for a new job around the same time I was supposed to close on the short sale. I was planning to use the townhouse as my primary residence, but now I won't even have the chance to live in it, but I believe the value is higher than my purchase price.
If I sell the townhouse (after some renovations) for a profit, can I use the proceeds for the sale to purchase a new home in TX where my new job will be without facing capital gains tax on the profit??
I already know about the 2 out of 5 year rule, but none of this applies to me. A 1031 exchange doesn't really fit even if I try to rent the townhouse because the new purchase would be for my primary residence. I don't want to pay capital gains tax, I would rather put all profit into a new purchase where my new job is. Is it possible??
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