Can the owners of a home exchange for Income Property to save money in Taxes?
President Clinton implemented the Taxpayer Relief Act of 1997. Presently, there is a capital gain tax exclusion in the sale of a principal residence where the owner has resided for 2 of the last 5 years on the first $250,000 of gain for a single taxpayer and up to $500,000 of gain for a couple. The taxpayers may take advantage of this tax exclusion every 2 years, for an unlimited number of transactions. This law eliminates the prior provisions and one-time exclusion for those 55 years old or older. Consequently, the owners of a home may at any time trade their property for income or commercial property. But there is no need to make the sale a part of an exchange transaction. The sale will get the benefits of the $250,000 to $500,000 of no tax capital gain described above. • Can 2 houses on a lot be exchanged, one owner occupied, the other one rented? Let us suppose that the 2 houses are the same. In this case one house will be considered the personal residence and will be treated as a
