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August 12, 2008


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The gov't has been trying to get at that money for a long time now. They had first talked about changing it when they discussed making major changes to the tax code last year (which never happened), but I guess they figured they could squeeze it into this bill and hopefully not too many people would notice. I think it's a bunch of hooey, but I am never surprised when the gov't tries to get more, more, more.

Jeremy Hart

You know what, Bill? I think you're right. Seems to me I remember something about this as well.

Well, squeeze it in they did - it was on page 690 of 694. I know we've gone to closings with owners who've lived in the home they're selling for a long time, who've still not understood the capital gains exclusion as it used to exist. There are going to be a lot of people now who will be more confused than ever.


Great post Jeremy! I had no idea about this rule and a quick tally it would cost me $4000 to sell my rental property. So what this rule is really doing is penalizing those people who are responsible with their money and do the right thing, and that $4000 goes to bail out those who are not responsible, how is this fair? Yeah, it is not $4 but $4000. Big difference...

Also, how does a 1031 land exchange play into this? Will that rule hold up?

Jeremy Hart

Stu, if you're doing a 1031 exchange on any kind of property, this rule won't apply because the exchange will have to follow different types of rules. For most sellers, a 1031 does NOT work because the property they're selling has been a primary residence, and thus subject to capital gains. For those sellers who are selling investment property, be it land / apartments / commercial etc., if they're not exchanging their property for another and are receiving income, then they'll be taxed at the capital gains rate like everyone else.

Good question though - I should cover 1031 exchanges again on the blog soon.

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