Bought house in 2006 at $200k Became rental in 2011: Similar homes selling for $120k Ready to sell in 2018, expecting $170k

I have not taken any depreciation (maybe I should have, but that is another question)

I'd like to take the equity from this sale (perhaps $35k) and put it into a commercial-type property (aircraft hanger) at about $100k. I am thinking there may be no need for a 1031 exchange if I'm not on the hook for capital gains tax on the house, so there would be no need to commit to a 1031 type schedule. I could just park the equity in my bank account and wait for the right deal at the airport.

Any holes in this plan? Does the fact that the home has recovered some value since the time it became a rental put me on the hook for US capital gains?

  • 1
    I did not realize there was a choice to not depreciate rental property ttlc.intuit.com/questions/… – user662852 May 18 '18 at 22:02
  • 2
    @user662852 You don't have to put the depreciation on your tax return, but the IRS assumes you have when you sell it. OP will want to amend the last 3 years. – Hart CO May 18 '18 at 22:05
  • @HartCO Actually, the OP ought to amend all the years from 2011 onwards to reflect the depreciation but can get refunds of overpaid tax only for the last three years; refunds from previous years are lost. – Dilip Sarwate May 19 '18 at 3:48
  • Do you know the assessed value of the land at time of conversion? Should be shown on your property tax records. – Hart CO May 19 '18 at 14:46

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