An investor owns a rental property that has appreciated significantly. Which tax planning strategy would be most effective for deferring capital gains?
Correct Answer
C) Using a like-kind exchange or installment sale
Like-kind exchanges (such as those available in some jurisdictions) or installment sales can defer capital gains by spreading the gain over multiple years or exchanging for similar property. Converting to personal use or claiming principal residence exemption has limitations for investment properties and may not be available for the entire ownership period.
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An investor owns a rental property that has appreciated significantly. They want to defer capital gains tax while acquiring a larger investment property. Which strategy would be most appropriate?
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An investor owns three properties: a principal residence, a cottage used personally 60% of the time and rented 40% of the time, and a pure rental property. For tax planning purposes, how should the cottage be treated?