If I stay in a new home while selling an old one, can I still avoid capital gains taxes?

July 29, 2005 9:12 PM

CapitalgainsFilter: I bought a new house and my old house is set to go on the market on Monday. I'm just two months shy of the 2 years minimum residence requirement for avoiding capital gains taxes, and will make sure the old house isn't sold before that cut-off date. But do I really have to sleep in the old house all the way up to the end date?

I'm moving most of my old junk to the new house, so the old house will show nicely and seem roomy and uncluttered.

But then I was thinking -- I could empty the old house so that buyers can imagine their own stuff in it (an empty house sells faster than a staged house, right?), and live in the new house.

If I continue to get all my mail at the old address and all the electric/gas/water are still on in my name, wouldn't I appear to still live at the old house for the full two years? Does the IRS even know where I'm sleeping each night or check up on those kinds of things?

posted by anonymous to Home & Garden (7 answers total)

can't you just not close the deal until 2 months from now? it's not like houses close the same day someone makes an offer.
posted by amberglow at 10:14 PM on July 29, 2005

and lots of people who sell have conditions, like that they stay until their new place closes, etc.
posted by amberglow at 10:15 PM on July 29, 2005

Actually, an empty house doesn't necessarily sell faster than a staged house. An empty house almost always looks smaller than a properly staged house, surprisingly. Sorry I don't have an answer to your main question. But I would think that as long as it appeared you had a PLACE to sleep at the old house, you could defend any questions if it came to that.
posted by peep at 11:16 PM on July 29, 2005

we bought a bunch of ikea furniture (and a good leather couch that we kept) for a house we just sold a a month ago. The final price surprised all the realestate agents, because it was much more than what comparable houses are selling for.

So, yah its probably a good idea to get rid of garbage, but I think having nice stuff would help.
posted by Iax at 11:52 PM on July 29, 2005

You definitely want to stage the place as well as possible. There are a bunch of reasons...

For one, some people can't visualize at all. Also, the place will sound different when empty, floors will be louder and it will echo. Finally, you can cover up defects that might turn people off initially. Sure, you probably want them to know about those eventually, but let them fall in love with your place first... (did I just say "let them fall in love with your place", ARGH! evil marketing get out of my brain!)

Actually, I thought it was common knowledge that an empty place is less attractive... You want it to be showroom perfect! (I wonder if you can rent furniture specially for showing the place...)
posted by Chuckles at 12:04 AM on July 30, 2005

My understanding is that if you moved for work, and you're more than 60 (or something) miles away from your old house, capital gains doesn't apply. But IANA_.
posted by Alt F4 at 12:05 AM on July 30, 2005

IAAL. I would sleep there one or two days a week, at a minimum.

What normally controls for domicile issues is where you intend to return, but the criteria used are objective - where you get your mail, the address on your drivers license, and where you are registered to vote. None of those are things that change quickly or without some action on your part.

The IRS does not have people tracking where you are, so it is not likely that anyone will challenge your claim. The 1-2 nights per week puts a stamp of good faith on the process, though.

And amberglow's point is right on the money. So to speak.
posted by yclipse at 5:57 AM on July 30, 2005