Capital Gains - Will I be charged Capital Gains Tax?

[Merriora]

Hello

Currently selling our main residence (www.LivingInWalnutGrove.com). We`ve lived in this residence for approx. 22 months and have recently purchased a new home in the same area.

If we do not sell our current home prior to taking possession of the new home, is their a chance that we will be chared Capital Gains tax when we do finally sell?

As a backup plan to holding 2 mortgages, I am looking at renting our current home on a month-to-month basis until it is sold, but will this cause tax issues?

Thanks,

 

[navaz]

It is a complex issue. It depends on a number of personal factors. In simple terms, if you had an apple tree and sold apples, you would be in the business of selling apples. After 10 years if you decided to sell the apple tree, you would have capital gains on that tree.

In real estate terms, if you purchased a rental property with a view to earn rental income, you would have a capital gain when you sold the property. If you purchased with a view to live in it, you would get an exemption for principal residence.

So your current transaction in blurred that we do not know your intentions, your history, the type of work you do etc. You need to consult and accountant to advise your course of action

 

[Merriora]

QUOTE (navaz @ Feb 20 2008, 08:04 AM) It is a complex issue. It depends on a number of personal factors. In simple terms, if you had an apple tree and sold apples, you would be in the business of selling apples. After 10 years if you decided to sell the apple tree, you would have capital gains on that tree.

In real estate terms, if you purchased a rental property with a view to earn rental income, you would have a capital gain when you sold the property. If you purchased with a view to live in it, you would get an exemption for principal residence.

So your current transaction in blurred that we do not know your intentions, your history, the type of work you do etc. You need to consult and accountant to advise your course of action

Thanks for the reply.

We purchased our current principle residence with the intention to live in it till we sold. We purchased a new home to live in it and want to have our current (old) place sold before we take possession, but you never know with the market if this will happen in the next month. Our intention was never to rent either property as an investment. Holding 2 properties will only happen until we sell our old principal residence.

If need be for tax purposes, we would stay in our current principle residence until its sold and simply allow a family member to stay in the new one till then.