Advanced Underwriting Consultants

Question of the Day – June 10

Ask the Experts!

Here’s the question of the day.

Question:  My client is widowed and wants to sell his primary residence.  His basis in the property is $250,000, and he expects to net $550,000 from the sale.  Can he defer paying capital gains tax on the transaction if he plans to buy a new primary residence?

Answer:  No.

The ability to continue to roll over primary residence capital gains from one property to the next ended in 1997, and was replaced by the $250,000 exclusion ($500,000 for married couples) of capital gains on disposition of a primary residence.

Here’s a link to a website where the rule is explained by a CPA.

So if your widowed client sells his primary residence and recognizes a $300,000 gain, the first $250,000 will be exempt from tax, and the other $50,000 will be subject to capital gains tax.  Your client must check with his own tax advisor to double-check his own numbers and whether he is eligible for the exemption.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.