I am selling a second home that was being lived in by my daughter. We have not lived in the home in the last five years. I want to sell the home and buy another home with the profit of the sale. I intend to use all the profit to buy the second home and use as a rental. I am married. Do I need to pay tax on the profit? Can I defer the tax by using all the profit to buy the second home? Is there other ways to shelter the profit of the sale ?
At this point, no, you would have to pay taxes on the sale of the second home (personal use assuming your daughter is not paying fair rental amounts and you not are treating the property as a rental).
If the property was a business/rental property, you may be able to defer the gain using a 1031 exchange. Your original property needs to be a business (rental) property to qualify; second homes or personal use properties do not qualify.
Basically there is a process whereby you can exchange like business properties and the gain on the sale of your original property is deferred until you sell the new property. Here is a link with more information on the process.
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