r2i forum

shreekarthik;83052We are faced with the dilemma of renting or selling our house. I have GC. Will appy REP before R2I-ing. My questions are regarding the financial aspects of selling v buying.

House was bought in Dec. 2004. If we sell it now all gains are tax exempt. But selling is tough with about 3 houses on the street on the market. The other alternate is to rent it. Rent will definitely cover the mortgage and some more. But if we decide to sell it in, say 2 years, will our gains be still tax exempt as this is not our primary residence any more....[/quote]


Good question.we r in a similar situation.Planning to r2i in 2009 summer.
the veterans out here we look forward for your suggestions.pls advice

shreekarthik;83052We are faced with the dilemma of renting or
House was bought in Dec. 2004. If we sell it now all gains are tax exempt. But selling is tough with about 3 houses on the street on the market. The other alternate is to rent it. Rent will definitely cover the mortgage and some more. But if we decide to sell it in, say 2 years, will our gains be still tax exempt as this is not our primary residence any more....[/quote]

I believe the gains are still exempt if you sell your house after 2 years. One of the condition to avail tax exemption is to live in the house at least 2 years in last 5 years.

PB

restlessdesi;83080I think you need to have the house as primary residence for only 3 out of the last 5 years (last 5 years from the date you sold). So technically, you have a 2 year window to sell the house after r2i-ing, without incurring capital gains tax.[/quote]

The relevant IRS document is Publication 523
http://www.irs.gov/pub/irs-pdf/p523.pdf
http://www.irs.gov/publications/p523/ar02.html#d0e2048

Relevant text -
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"To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test), and

Lived in the home as your main home for at least 2 years (the use test).

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So my understanding is that you have a 3 year window after you STOP residing in the house to claim this exclusion.

That document also discusses reduced exclusion (< $500K) if the 2 year period is NOT met. Look at Page 15.

OP needs to figure out if he/she meets those conditions.

anusril;83107The relevant IRS document is Publication 523
http://www.irs.gov/pub/irs-pdf/p523.pdf
http://www.irs.gov/publications/p523/ar02.html#d0e2048

Relevant text -
---------------------------------------------------------------------
"To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

Owned the home for at least 2 years (the ownership test), and

Lived in the home as your main home for at least 2 years (the use test).

---------------------------------------------------------------------
So my understanding is that you have a 3 year window after you STOP residing in the house to claim this exclusion.

That document also discusses reduced exclusion (< $500K) if the 2 year period is NOT met. Look at Page 15.

OP needs to figure out if he/she meets those conditions.[/quote]

Thank you very much. Yes we have owned the since Dec. 2004. so we will pass the ownership test. We have lived here since then. So we have a 3 year window to sell the house. At this point renting seems to be the best bet.

backtomumbai;83166I am facing the same issue now , have a GC and Have been living in my house since Dec 2005 .Selling seems hard with 3 more houses on the street .

I am worried about the expenses i might have to incur in maintaining it from India .
How feasible is that ???What are the pitfalls ?Any help/advice by the gurus would be greatly Appreciated .

Thanks[/quote]
I cannot advice to your situation but explain my situation and my game plan. I bought my house in 2003 and planning to R2I in Feb09. I am planning to put my house in the market this spring around April so that I have close to 10 months to sell it. If I was able to sell it earlier, I would move to an apartment until R2I. Otherwise, I have no other option but to rent it which I would start considering in Dec08 or Jan09. I have no mortgage and have brother-in-law around who might need a house to rent and not keen on buying one. I might as well rent this to him if he's interested and continue it on market and request him to take care of the sell transaction when the time comes. My younger brother also living in the same community will be of great help.

My first option is to sell it off for peace of mind and also don't want to burden my brother or BIL with this additional responsibility.

ketki01;83246I am in the same dilema...one of things i am trying to find an answer to is :

if i leave for india this year, rent my house in usa, and 3 years later if i sell my house hear, do i have to pay capital gain tax in india on the profit i make ...usa allows the 250k exception but i am not sure if india has any such thing....
also does it help if i am in RNOR status or not for tax puropses when selling house in usa ?[/quote]

While you have RNOR Status Rental income and House sell gain will not be taxed.
In ROR status both will be treated as income and Tax is liable in India.