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Capital Gains On Lease Purchase Primary Residence

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Capital Gains On Lease Purchase Primary Residence

Old 03-04-2016, 06:51 PM
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Default Capital Gains On Lease Purchase Primary Residence

I understand that you have to be in the house for two of the previous five years in order for there to be no capital gains tax. I'm not worried about the caps, but I have two questions.

As best I recall, simply buying a house and using it as a primary residence for two years meets the criteria for exemption. Am I correct with that?

In a lease purchase scenario, does the two year period start when you sign the lease and move in, or does it start when you actually purchase the house and record a deed?
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Old 03-04-2016, 07:40 PM
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Starts when you purchase and record the deed. Who is the tax collector sending the bill to and receiving the check from? The owner, not the leasee. You have no ownership at the time the lease is signed, the option gives you the opportunity to become the owner in the future, when/if you exercise the option..
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Old 03-04-2016, 08:01 PM
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Originally Posted by runabout View Post
Starts when you purchase and record the deed. Who is the tax collector sending the bill to and receiving the check from? The owner, not the leasee. You have no ownership at the time the lease is signed, the option gives you the opportunity to become the owner in the future, when/if you exercise the option..
Thanks for the input, but would a lease purchase not be the same as owner financing which began upon executing the contract and moving in?

All the monthly payments went directly to the sales price which is specified in the contract. No doubt the property remained in the name of the seller who was paying the property taxes during the lease period of the purchase, so I wasn't sure how this kind of thing works.
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Old 03-04-2016, 09:25 PM
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Thanks for the input, but would a lease purchase not be the same as owner financing which began upon executing the contract and moving in?

Think about this. You are paying a monthly lease, the owner is discounting a future purchase by the amount of each lease payment. He can deduct his expenses (to the extent of your lease payments), you can claim nothing. You walk away, the owner is still the owner and has collected rent from you for however long. He has no loss and you have no gain. If he's financing it, he still has your money paid in, but has to repossess the house because the house is now in your name, your credit sucks for quite a few years, and you can't even claim a loss since he'll probably send you a 1099 for the amount left on the mortgage. You can go for cap gains exemption when you sell a house you have owned and lived in at least two years ...
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