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Want To Avoid Depreciation-Recapture Tax? Then Die
By Priya Jestin, Staff Writer
You buy a rental condominium in a 1031 exchange as a holiday home, and then decide to covert it into your primary residence. In such a case, does Section 121 principal residence sale tax apply to the depreciation-recapture tax?
I know, this sounds a bit convoluted, but who ever said Section 1031 dealings were easy. To get back to the question, you can avail of Section 121 principal-residence-sale tax exemption of up to $250,000 (up to $500,000 for a qualified married couple filing jointly). But it does NOT apply to the depreciation-recapture tax. So, how do you avoid this dreaded tax? The only way (according to experts) is to die while still owning the property. Now, that’s really taxing, what says?
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