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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?
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.
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