If I can not rent my rental property?

Question

What if you can not rent you rental property?
I co own a rental with SO, we are splitting, I need a place to live (rental not an option due to location) dont really want to pay cap gains on sale . was thinking of taking my proceeeds and buying another rental property that I would live in at some point. I know all the tax rules on living in it to convert to primary, are ther any rules that if you cant rent it you can live in it an not pay the cap gain?

Answer 1

You can defer capital gains taxes if you do a Section 1031 exchange, however you can NOT live in the property if you do so. I wouldn't even hazard a guess as to how you'd handle that while splitting out a partnership, or even if it's possible to do so.

If you sell out and buy another property that you use as your home, the CG tax is due on the first property at sale time. Don't forget the depreciation recapture! (And don't forget it if you convert the new property to your principal residence either. Even if you qualify for the exclusion for sale of a principal residence, the depreciation recapture is still taxable.)

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Answer 2

sorry, you are just going to be subject to cap gain(if you make a profit)
the provision of using your proceeds to reinvest in another went out a long time ago, and it would not apply here for you anyway because it would not be like kind investment(since you would be using it as a residence)

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