If we own one investment property in one town, say in Providence, and it's a two-family home, and want to sell the two-family home and buy another investment property in another area of the state, say South Kingstown, do we have to pay capital gains tax before purchasing that second property? Can you, in other words, kind of roll it over into the other investment property?

Yes on your first question, no on your second question. Here's the deal:

If you sell investment property, you'll face tax consequences, Mark Higgins said in an interview at the University of Rhode Island in Kingston, where he is a professor of accounting at the College of Business Administration.

As the Internal Revenue Service puts it in Publication 17, "Investment property is a capital asset. Any gain or loss from its sale or trade is generally a capital gain or loss."

And things can get pretty complicated. When you sell an asset, you typically must come up with the property's "basis" to help figure out your profit. If you're selling your principal residence (the house you live in), it's usually pretty straightforward: your basis is generally how much you paid for the property, subject to certain adjustments.

With an investment property, it's not that easy. For instance, you must account for the depreciation you claimed on the property over the years. (Depreciation is generally a tax break you get to claim each year on investment property. It's a way of recovering the money you spent to buy the property.)

So there's lots of bookkeeping involved, and all the figuring can get nasty. Then there's the tax you must pay.

To avoid this, can you roll over the money you get when you sell the property, using the proceeds to buy another property? No, said Higgins, who is also a certified public accountant and co-author of Concepts in Federal Taxation. "You can't roll over [the proceeds]." If you sell, there'll be a tax due."

But there is another option, a "like-kind exchange." This lets you postpone the tax that would usually be due on the sale of your investment property, Higgins said.

In effect, you swap one kind of investment property for another. But there are some twists. For instance, you must find someone who's willing to swap with you (or go through a third party, who'll act as a kind of intermediary).

In addition, the properties must be similar. "The exchange of property for the same kind of property is the most common type of nontaxable exchange," according to IRS Publication 17. "The exchange of real estate for real estate" will usually qualify.

Even if you clear these and other hurdles, however, there's still a lot of bookkeeping involved, and things can get even more complicated if cash is involved in the swap.

Still, this option may be worth pursuing, especially if you want to postpone tax consequences.

Other details are involved in like-kind exchanges, too many to list here. It's not a do-it-yourself deal, Higgins said; you should seek the help of a professional, such as an accountant or tax lawyer: "The rules for this need to be strictly followed."

To read more about like-kind exchanges, see the agency's Web site: www.irs.gov.