Can you defer the tax on one piece of property sold toward purchase of another?

Answer 1

If you're talking about property held for investment you can defer the tax by doing a Section 1031 exchange. But if you simply sell one piece and purchase another you must pay the tax on the property sold.

Answer 2

Bostonian's answer is correct, but a little more detail might help you. To do a Sec 1031 (tax-deferred, NOT tax free) like kind exchange, both the old property & the replacement must be held for the production of income. That means you cannot sell a rental and buy your home and defer the tax. It can be residential for land or commercial property or any combination.

You must use a qualified intermediary ( ie a title company who knows how to comply with the law in this area) who holds the old property until sold, the proceeds of the sale and then applies the money to the new purchase. Any unlike property received is taxable income as is any of the sale proceeds prior to completion of the exchange. There are also time limits if it is not a simultaneous exchange.

There are a ton of I's to dot & T's to cross, so consult a TAX PROFESSIONAL, NOT a realtor for tax advice before you begin.

See the section of Pub 544 (link below) on like-kind exchanges.

Answer 3

depending on your filing status, you can claim a capital gains tax exemption of $250k or $500k on the sale of your principal residence. However if your an investor, the rules are different.