Alan said:inky dink wrote:
For the purpose of argument's sake, let's presume you can do this.There is an AICPA Case Study that supports this theory because
Sec. 121 does not have any language that prohibits it when the
sale is to a related party. It is based on a private letter ruling
relating to the old Section 1034 deferral of capital gain on the
sale of your main home if you reinvest the proceeds in a new
home within two years. That section did not have any language
that prohibited the deferral of gain when the sale was to a related
party where it would be depreciable property.
You can read it here:
Now tell me who is going to give your S-Corp a mortgage so you
can have the proceeds from the sale? Is there a State other than
California where mortgages do not have a "due on sale" clause?
If you want a workable legal exploitation of the tax code, consider
this. A Dentist buys a lot zoned commercial, gives a 20 year lease
of the land to a Professional Corporation which in turns builds a
house to be used as its office and as offices leased to others, the
PC pays the mortgage from the rents and depreciates the building.
After 20 years or more, the Dentist terminates the lease, removes
the tenants, sells her/his primary residence taking the $250K/$500K
exemption, lives in the house for two years, and then sells it taking
the exemption again.
The difference between this scenario and the OP's scenario is:
1) Economic Substance;
2) The ability to get a mortgage; and
3) Triple dipping (two exemption and 20+ years of depreciation).
This can also be done by someone in the rental housing business
who converts rental units into their primary residence every 2+
The tax code favors people who engage in tax planning.