J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

5.11 Holding Period for Real Estate

The holding period starts the day after the date of acquisition, which is the earlier of: (1) the date title passes to you or (2) the date you take possession and you assume the burdens and privileges of ownership. In disputes involving the starting and closing dates of a holding period, you may refer to the state law that applies to your sale or purchase agreement. State law determines when title to property passes.

If you convert a residence to rental property and later sell the home, the holding period includes the time you held the home for personal purposes.

Year-end sale.

The date of sale is the last day of your holding period even if you do not receive the sale proceeds until the following year. For example, you sell land at a gain on December 30, 2012, receiving payment in January 2013. The holding period ends on December 30, although the sale is reported in 2013 when the proceeds are received. Note that the December 30 gain transaction can be reported in 2012 by making an election to “elect out” of installment reporting (5.23). A sale at a loss is reported in 2013.

- - - - - - - - - -

Planning Reminder

Year-End Sales

Tax reporting for year-end sales of real estate is different from that for publicly traded securities. Gain on a sale of realty at the end of 2012 may be deferred under the installment sale rules (5.22) if payments will ...