Thanks for posting this, Nords. We are a military family who has hung on to a few properties in lieu of selling. As we near our retirement we will need to sort out what makes the most financial sense. This article will come in handy.
Glad it helps-- and it's good to see you posting here!
I think you are talking about a 10-31 exchange. Pretty common amongst RE investors IMO (I've got 4 years in November and even I know that lol). I actually plan on doing a 10-31 exchange if my tenant wants to stay yet another year when the lease expires again. I intend to use the money to buy a smaller cottage in the sticks to retire to, away from the ghetto that the US is rapidly turning into.
Um, no. If I'd been referring to a 1031 exchange then Michael would have written the post about Section 1031 of the IRS code, not Section 121.
I'm not a CPA, but perhaps a 1031 is more of a deferral of capital gains rather than an exclusion. The "problem" with a 1031 is that after it's finished you still have real estate (or at best, a managed TIC property). I'm interested in the article's clear explanation of the situation where a military servicemember ends up hanging on to real estate for a few years after a transfer (as a long-distance landlord) and then wants to sell it without exchanging it for another property.
While a 1031 might defer capital gains, I think depreciation recapture tax would still be due. But again I'm still not a CPA.
For those googling, 1031 isn't hyphenated.
Well, I guess it could be: "10-31: Crime in progress"
There seems to be a cottage SEO industry about punctuation. Typing "10 31" into Google produces sites with the phrase written as "10 31", "10/31", 10:31", and so forth. I wonder what they're trying to achieve.