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Is there anything special to the 2 of 5 year calculation for primary residence ? Can you sell every 2 years and be in compliance ?
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Is there anything special to the 2 of 5 year calculation for primary residence ?

No, it just allows you to break up your qualifying time, especially for residing in the home, into pieces. So, for example, you can live there for 6 months a year for 4 years and still qualify. Generally, ownership doesn't switch like that, so for the ownership test, it's not as important. But for people with more than one home, the ability to break up residency can be important. That said, if you are breaking up residency like that, it's best to have some type of documentation to show that you meet the full 730 days in the last 5 year requirement, just in case you get questioned.

Can you sell every 2 years and be in compliance ?

Yes, the closings just have to be 2 years and a day apart from each other. If the exemption claims are on tax returns that are only one tax year apart, say one sale was on June 30, 2017 and one sale was on July 1, 2019 - so you claimed an exemption in 2017, and then claimed it again in 2019, you might get a question from the IRS to clarify the dates. But as long as they are 2 full years and a day apart, you should be fine.

AJ
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Yes, the closings just have to be 2 years and a day apart from each other. If the exemption claims are on tax returns that are only one tax year apart, say one sale was on June 30, 2017 and one sale was on July 1, 2019 - so you claimed an exemption in 2017, and then claimed it again in 2019, you might get a question from the IRS to clarify the dates. But as long as they are 2 full years and a day apart, you should be fine.

Just curious and too lazy to look up. Does the sale have to be 2 years apart? Using your first example where qualifying time is broken into pieces, a person could break up the primary residency between two houses in a little over 4 years. A simplified example is that a person lives in one home for 1 year, 11 months. Then they move to another home for 2 years, 1 month. Then they move back to the first home for 2 months. They now have lived in two homes over 4 years, 2 months where they lived in each home for 2 years, 1 month. If they sell both homes in the same year, could they exclude the gains from both homes?

PSU
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Nope.


Eligibility Step 4—Look-Back

Determine whether you meet the look-back requirement. If you didn't sell another home during the 2-year period before the date of sale (or, if you did sell another home during this period, but didn't take an exclusion of the gain earned from it), you meet the look-back requirement. You may take the exclusion only once during a 2-year period.
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They now have lived in two homes over 4 years, 2 months where they lived in each home for 2 years, 1 month. If they sell both homes in the same year, could they exclude the gains from both homes?

No, generally you can only claim one exemption every 2 years, so the sales would have to be 2 years apart from each other. Of course, as with many tax rules, there are some exceptions, like the death of a spouse, or a divorce from a spouse within the 2 year timeframe, if you're in the military, etc. IRS Pub 523 has the details https://www.irs.gov/pub/irs-pdf/p523.pdf (I know - that would require looking it up.)

AJ
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