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I have a question which to me sounds like it may be a bit complicated.
I bought a house about 10 years ago. The house has a lot which is separate and right next to it. Both were purchased together. Let's call them block 100 lot ( with the house) and lot 2 (just a piece of land). We lived there for about 7 years until my family expanded and I moved into another house approximately 4 years ago. According to the tax laws, there's no capital gains tax for up to $250k for an owner but it would be 500k including spouse. This is only as long as I'm living in the house 2 out of the past 5 years. Being that I've been out of the house 4 years, it's only 1 out of the past 5 years which wouldn't exclude me from the capital gains tax. ( I'm not looking to defer the taxes by purchasing another investment property so let's not go there.) The only choice to save me from this whopping tax would be to go back and live there for another 2 years ( One year isn't enough cause I'd lose that first year and need 2 out of 5.)
I'd like to end up subdividing the property into several lots before selling it. Lot 2 would be subdivided into 3 lots. However, in order for that subdivision to work out with the zoning laws, about 10 feet from lot 1 needs to be part of that subdivision in order to conform the lots into correct sizes. Without that extra 10 feet I'd lose one of those lots.
Being that the house is too small this is what I'd like to do. Go ahead with the subdivision and build one of those houses to live in. After the 2 years I'd like to move elsewhere. Can that be done legally? Meaning, since I'm not living in that exact house which I purchased or because I bought the properties together and the subdivision is contingent on both properties it would be okay. Secondly, would I be able to sell any of the other lots during the 2 year period? Thirdly, what would consider me living in that house for the 2 year period. Is going away for the 2 summer months okay? Is living there most of a year okay? Any other helpful suggestions are welcome. Thanks
I bought a house about 10 years ago. The house has a lot which is separate and right next to it. Both were purchased together. Let's call them block 100 lot ( with the house) and lot 2 (just a piece of land). We lived there for about 7 years until my family expanded and I moved into another house approximately 4 years ago. According to the tax laws, there's no capital gains tax for up to $250k for an owner but it would be 500k including spouse. This is only as long as I'm living in the house 2 out of the past 5 years. Being that I've been out of the house 4 years, it's only 1 out of the past 5 years which wouldn't exclude me from the capital gains tax. ( I'm not looking to defer the taxes by purchasing another investment property so let's not go there.) The only choice to save me from this whopping tax would be to go back and live there for another 2 years ( One year isn't enough cause I'd lose that first year and need 2 out of 5.)
I'd like to end up subdividing the property into several lots before selling it. Lot 2 would be subdivided into 3 lots. However, in order for that subdivision to work out with the zoning laws, about 10 feet from lot 1 needs to be part of that subdivision in order to conform the lots into correct sizes. Without that extra 10 feet I'd lose one of those lots.
Being that the house is too small this is what I'd like to do. Go ahead with the subdivision and build one of those houses to live in. After the 2 years I'd like to move elsewhere. Can that be done legally? Meaning, since I'm not living in that exact house which I purchased or because I bought the properties together and the subdivision is contingent on both properties it would be okay. Secondly, would I be able to sell any of the other lots during the 2 year period? Thirdly, what would consider me living in that house for the 2 year period. Is going away for the 2 summer months okay? Is living there most of a year okay? Any other helpful suggestions are welcome. Thanks