Property Management Software

Blog by Niman Singh

Fremont, California

T-ReX Property Management Software for real estate investors to save them TIME and MONEY

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I'm Selling My House to Myself!!!

Posted at Property Management Software by Niman Singh

Jun. 18, 2008

Categorized in: Property Management Software

Tagged with: real estate professionals, taxtips

Starred by: 2 Members

Ever Considered Selling Property To Yourself???

Selling property to your own S-Corporation can be beneficial in TWO specific situations.

1.) You do not meet the requirements for excluding capital gains on the sale of your primary home

2.) You can not take advantage of depreciation on appreciated property

By selling to S-Corp, you can:

For Example:
You lived in a property for 3 years, and rented it out for the next 7 years. Since you haven't lived there for 2 of the last 5 years, you cannot sell the property as a primary residence and avoid the capital gain.

However, after moving out of the property, you sold it to your own S-Corporation, which allowed you to exclude capital gain because requirements for the primary residence two-year rule were met.

Take Advantage of the 2-Year Rule

The other advantage is:

For Example:
You purchased a home for $50k many years ago, and it is worth $500k now. If you decided to just rent it out, the basis for depreciation would be the original basis of $50k.

But, after selling it to your S-Corporation and then renting it out, you can depreciate the new basis of $500k.

new basis on the appreciated property

Clearly this will bring you substantial tax savings....

Save on Taxes

But be careful!

Selling to your S-Corp isn't for everyone!!!

Avoid this strategy if:

For Example:
You sell your primary residence with a gain of $240k to your S-Corp, and pay no tax due to the exclusion.

However, if you could not meet the exclusion, the $240k gain would be taxed at ordinary income tax rates... it would have been more beneficial to just sell the property and pay capital gains tax of 15% instead.

you cannot take advantage of the exclusion amount