converting investment property to principal residence

Dear M. Hickox: I have an investment property which was purchased as a 1031 tax  free exchange with funds from a previous investment property.  I have  rented this property for the last 3 years, and am considering converting  it to my own residence due my advancing age.  Question:  What will my tax liability be when I convert from investment to primary residence.  The  property originally cost $200K and I put $100K of funds tax free as a  downpayment.  The property is now worth approximately $230K.

Dear Josephine:  Here is the good news:  Converting a rental property to a principal residence does not trigger any tax liability.  If fact, if you now live in the converted property for 2 more years you can sell the property and qualify for tax EXEMPTION under section 121 of the Internal Revenue Code.  Hope this helps.  Sincerely,

Steve Hickox
Attorney / President

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