Capital Gains on Investment Property

Investment property held for business or investment purposes, including commercial buildings, land, and residential rentals in Columbus, OH, is generally subject to capital gains tax when sold at a profit. The tax treatment depends on the holding period, the property's adjusted cost basis, and whether any depreciation was claimed. Property held for more than one year generally qualifies for long term capital gains rates, while property held for one year or less is generally taxed at ordinary income rates. Because investment property is distinct from a primary residence, the Section 121 exclusion for the sale of a home does not apply, and investors generally cannot exclude any portion of the gain unless they defer it through another mechanism such as a like kind exchange.

Under Section 1031 of the Internal Revenue Code, investment property held for productive use in a trade or business or for investment can generally be exchanged for other like kind investment real property without immediate recognition of the capital gain, provided the exchange follows the required structure. This includes using a Qualified Intermediary, meeting the forty five day identification period, and closing within the one hundred eighty day exchange period. Columbus, OH investors holding office buildings, retail centers, industrial space, or raw land often use this deferral strategy to reposition capital into different asset classes or geographic markets without paying tax on the sale in the same year. Because the Ohio Statehouse district and surrounding Franklin County submarkets have seen shifting demand across property types, many local investors evaluate a one thousand thirty one exchange when moving between commercial categories.