Real estate investment taxation
If I purchase a second home as an investment and I
sell it for a profit after 6 months, how do I report
this on my personal income tax return?
And at what rate is the profit taxable?
Also, if I re-invest this profit right away by purchasing another house to be used as an investment, do I still have to pay income tax on the original profit?
1 Answer from Attorneys
Re: Real estate investment taxation
There are ways to defer tax on sale of investment real estate, but it has to be structured in the right way with the funds escrowed upon the sale of the property for investment in a second, like-kind property under section 1031 of the Internal Revenue Code.
A sale of a second home would be reported on your Schedule D as a capital gain. If it is held less than a year, it would be a short term capital gain, therefore not qualifying for the capital gains rates.
If you would like to discuss your questions further, feel free to e-mail.
The above answer should not be construed as legal or financial advice. The response is based on the limited set of facts you presented. It is possible that the answer may change after a review of a more thorough and specific set of facts.
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