@stech wrote:
Thank you full detail response
House was purchased in 1980 and all three names were added at that time
Father passed away in 2016 and son moved to Texas. Does that make complication of the use test? Son did live with parents until 2016 and did visit surviving mom multiple times at that same house which was sold. It was his residence as well.
house was sold July 2019
Is Mom limit $250K or $500K. Her filing status is Single since her husband passed away > 2 yrs. what’s happens to Father share of exclusion
@AnnetteB6 Son’s spouse is not the owner. So $250K is the limit then. But he is married though.
You still need to review the deed from 1980 to determine if it was joint with rights of survivorship or not. Assuming it is not, then you were 1/3 owners at that time.
To qualify for the exclusion, you must have lived in home as your main place of residence (visits don't count) for at least 2 years (731 days) of the 5 years prior to the sale. Since the home was sold in July 2019, the testing period starts July 2014. You would qualify for the exclusion if you moved to Texas in August 2016, but not if you moved in June 2016. (You may need to get a calendar and determine the exact dates. There is also an extension available if you moved under military orders.)
Your mother is single, her exclusion is $250K. She would have been able to use the married exclusion only if she sold within 2 years (I think) of her spouse's death, its too late now. Although you are married, you can only use the $250K exclusion since your spouse is not an owner, and only if you meet the residency test.
You still need to diligently document your adjusted cost basis, the higher you can document your basis, the less taxable gain you will have.
