Can I Use Property Sale Money for College Tuition and Still Avoid Capital Gains?

Q: I found your article on exchanging real estate tax free when searching for help in reducing our capital gains tax on an investment property we will be selling in the next three months.

Our situation is as follows...

My husband is a retired military officer, currently in the private practice of law. I do not work. We have two children, ages 18 and 15. Our 18 year old will begin college in the fall at a private university costing approximately $45k/year. Due to my husband's income as well as property and investments that I inherited, our children do not qualify for any financial aid for college.

We will be netting approximately $150k on the sale of an investment property, and have been advised to do a like-kind exchange for more investment property. However, I would like to have that money available for tuition payments and not tied up in property.

Is there any way we can set up a fund to pay for tuition using these proceeds and avoid the huge tax we would pay on the capital gains of this property?

A: Not that I know of...

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