Personal Residence Sale-Partial Exclusion

[Randall]

Am I missing something?  I think the rules have changed.  I thought in the past the gain was prorated.  The ATX unput sheets for partial exclusion is excluding the whole gain.  425 days owned and lived in home out of two years (730).  Gain of $30k is all excluded.  Is it the whole gain up to the percentage of total exclusion (in my case $145k out of total $250k).

[jklcpa]

If the full 24 month/730 day residency test isn't met but otherwise qualifies, then the second step would be to prorate the $250K gain per person by the amount of time of residency.

In your client's case, 425 days / 730 days x $250K = potential gain exclusion for the taxpayer would be $145,548.  If a joint return with spouse also having ownership and meeting the tests, the spouse would also have that exclusion, so the total exclusion could be as high as  $291,096. 

Your client's gain is only $30K and is below the prorated exclusion in either case, single or joint, and is fully excludable.

[Gail in Virginia]

I thought that the partial exclusion only applied if you meet a further test - moving for work, health, unforeseen circumstances, or other facts and circumstances that qualify as hardship. 

[Pacun]

8 minutes ago, Gail in Virginia said:

I thought that the partial exclusion only applied if you meet a further test - moving for work, health, unforeseen circumstances, or other facts and circumstances that qualify as hardship. 

I agree... but the original poster, I believe, has that sorted out and the question was more about ATX taking out 100% of the profit. 

[jklcpa]

1 hour ago, Gail in Virginia said:

I thought that the partial exclusion only applied if you meet a further test - moving for work, health, unforeseen circumstances, or other facts and circumstances that qualify as hardship. 

I agree also but the OP was already asking about the partial exclusion so I assumed that the taxpayer in his question already met that requirement. Sorry if I didn't exactly specify that.

Any others reading or relying on this post for their own use should refer to all of the rules in Pub 523. 

[Randall]

Thanks all.

 

[Abby Normal]

20 hours ago, Gail in Virginia said:

unforeseen circumstances

Not being psychic, I find everything to be 'unforeseen.' but seriously, the IRS will accept almost anything for this 'loophole.'