Sale of Home

[erdls]

My wife and I built a primary home 30 years ago in one city.  We bought a second home in another city 15 years ago.  The past two years we have lived in the second home due to the  availability of more medical services for a series of medical problems.  We maintained our mailing address and voting precinct with the primary home.    This year we sold the second home for a profit.   Since we owned the first second home for at least 2 years during the 5-year period ending on the date of sale, I believe we meet the Ownership test.  Since we have used the home as our principal residence for at least 2 years during that same 5-year window, I believe we have met the Residence test.  Since we have not claimed the Section 121 exclusion on another home sale during the 2-year period before the current sale, I believe we meet the Look-Back Test.  I believe that our profit on the sale (75K) is not taxable, but I am worried that we did not change mailing addresses or voting precincts.  I picked up mail and drove to vote.  Do I need to worry about this or only if we are audited?  How do I explain this on the tax forms?

[Bsch4477]

No documentation is required. Your situation is easily explained in the unlikely event of an audit. 

[AmeliesUncle]

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@erdls wrote:

We bought a second home in another city 15 years ago.  

The past two years we have lived in the second home due to the  availability of more medical services for a series of medical problems.  

We maintained our mailing address and voting precinct with the primary home.    

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There are several problems.

You are calling the 30-year home your "primary home".  That seems extremely questionable if the 15-year home actually became your Principal Residence, rather than a temporary absence from the other home.

Even IF the 15-year home became your Principal Residence, there is another rule ("Nonqualified Use") that says you can only exclude 2/15ths of the gain (15 years of ownership; the time it was your Principal Residence was AFTER it was not your Principal Residence).  In other words, you could only exclude a small portion of the gain.

In addition to only being able to claim 2/15 of gain from that home, it also would mean that two years of the 30-year home was NOT your Principal Residence.  The same "Nonqualified Use" rules would result in that whenever you sell the 30-year home, you won't be able to exclude those two years (if you sold it two years from now, you could only exclude 30/32nd's of the gain because there were two years it was NOT your Principal Residence).