Can capital gains tax on rental real estate be offset by the purchase of other property?

by Amy L. Bishop, CPA, MST | Jun 03, 2019

askacpaiconCan capital gains tax on rental real estate be offset by a time-share purchase? A motor home? A cabin cruiser yacht?

You cannot offset a capital gain by purchasing other property. You may only defer the gain in a like-kind exchange of like-kind property. This defers the gain until the replacement property is sold, unless it is replaced with like-kind property. RVs and other large living quarters that move around are considered personal property, and thus not eligible for a like-kind exchange. The only way any of these items would qualify is if they are stationary (think a boat that is permanently docked and assess real estate tax) and help out as investment property (i.e., a time share that is purchased for the purpose of renting to others). Purchasing a new rental real estate property would be eligible for a like-kind exchange.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Amy L. Bishop, CPA, MST, is a tax and accounting manager with Delisi, Keenan & Associates PC in Greensburg, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.