Renting Out Home
REM #F717
By Ilyce R. Glink
Summary: A home owner is unable to sell his home and has decided to rent it out. Ilyce explains the tax law concerning selling a rental property.
Q: I purchased a new house and have not been able to sell the old one. So,
I’ve decided to rent it out. The renters I’ve been talking to want
a 3-year lease.
I am concerned about whether I would owe taxes on the future sale of the property, as I have about a $250,000 profit on the property. Is there a way to transfer the house to a limited liability corporation (LLC) or other such corporation to allow the sale to occur before the "2 out of 5 year" requirement is up?
A: If your tenants lease your home for 3 years, you can still sell the home while the tenants live there. And even if you sell it on or before the end of the third year, you would still have owned if for two out of the prior five years and qualify for keeping the $250,000 in profits (up to $500,000 if you're married).
I think having tenants who want a long-term rental is very fortunate. Your property may continue to grow in value and you'll be hopefully covering at least most if not all of your expenses.
Please make sure whatever type of lease or lease/option you sign covers all
of your concerns. A real estate attorney should be able to help
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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