Other Real Estate Information

Other Real Estate Information Personal Residence Exemption (Section 121)

Occupy as a Primary residence (personal use) for 2 years out of the last 5 years. Exemption is $250,000 per person (max of $500,000 per couple)

	Conversion from a Rental to a Residence Rule Update Legislation was passed by Congress on October 11, 2004 that contained the 5-year restriction on 1031 Like-Kind exchanges involving a principle residence. The provision was included in the Conference Agreement on H.R. 4520, which is a larger corporate tax bill to address the ongoing FSC-ETI trade and tax dispute with the E.U. The compromise conference agreement has passed both the House and Senate. Sec. 840 states that the exclusion for gain on the sale or exchange of a principal residence does not apply if the principal residence was acquired in a Like-Kind exchange in which any gain was not recognized within the prior five years. This legislation will be effective for sales or exchanges of principal residences after the date of enactment. The provision was a revenue raiser, raising exactly $200 million over the ten-year budget window. The provision was included in the respective versions of both the House and Senate bills, making it virtually certain to be in the final bill because both bodies essentially agreed on it. Below is a brief discussion of the provision, as well as an attachment that has the full description from the Conference Report Statement of Managers.

Involuntary Conversion (Section 1033) If it is a personal residence, you are still eligible for Section 121. If it is Investment property
	Reinvestment only 3 Tax Years to reinvest into Like Kind Property No need for a Qualified Intermediary

Investment Property (Section 1031) Any real property held for investment or business use. The Internal Revenue Code states that neither gain nor loss is recognized if a property held for investment is exchanged for “Like-Kind” property. The taxpayer may avoid the taxable sale and purchase and qualify for Exchange treatment if, prior to the sale of the Relinquished Property, the taxpayer enters into an Exchange Agreement with a "Qualified Intermediary", who structures the exchange transactions properly to meet all of the requirements of the Code and the Regulations. Tax is Deferred, Not Forgiven!