AboutHelen P. O`Planick, EA Expertise I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.
Experience I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.
Organizations National Association of Enrolled Agents
Publications I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.
Question I purchased a property with the intent of its use as a rental unit. The tenants loved the property and I agreed to sell it to them. Both purchase and sale will be within the same tax year, 2009. At what rate will my capital gains be at?
In a related question, if I use a 1031 exchange to defer the capital gains, does the basis of the new property decrease by the gain of the first property, or does the basis of the first property become the basis of the new property (irrespective of the purchase price)?
Answer If you sell before you own the property a year or less, your gain is ordinary and taxed at whatever your tax rate is.
If you do the like kind exchange (correctly), your basis in the new place will be your basis in the old place, plus any extra money you put into it.
