If you sell a rental property in 2013 in Virginia and use the money to purchase another property in Florida, are you subject to capital gains taxes?

ANSWER

The BIDaWIZ Team's Answer:

Whenever you sell a property at a capital gain, you generally have to pay tax at the time of the sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Both properties must be held for use in a trade or business or for investment. Is this the case? Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment. There are some restrictions in terms of when you need to purchase the new property. Specifically, a taxpayer has 45 days after the date that the relinquished property is transferred to properly identify potential replacement properties. The exchange must be completed by the date that is 180 days after the transfer of the relinquished property, or the due date of the taxpayer's federal tax return for the year in which the relinquished property was transferred, whichever is earlier. Thus, for a calendar year taxpayer, the exchange period may be cut short for any exchange that begins after October 17th. However, the taxpayer can get the full 180 days, by obtaining an extension of the due date for filing the tax return.