PK:
Thanks for taking the time to post an answer to my question, but I already knew that my wife and I meet all the eligibility tests to qualify for an exclusion of up to $500,000 of our capital gain from selling the house.
The question I have relates to how much of the $500,000 exclusion we can use, which requires calculating the “nonqualified use” gain, which I understand is computed by dividing the total number of “nonqualified use” days over the total number of days we owned the home. I need to know whether or not I am correct in my interpretation of certain 26 U.S.C., Section 121 laws that apply to our eligibility to exclude gain from the sale of our principal residence.
Specifically, I want to confirm that the time our house was rented out while I was on official extended duty overseas on our last two assignments prior to 7/3/2014 can be considered as “qualified use” of our residence, even though we rented out our house while we were overseas. This would allow us to consider all of our home ownership from 1997-2020 as “qualified use” such that we would be able to benefit from the entire $500,000 capital gains exclusion (for married couples filing jointly).
Timeline
7/31/1997 Purchased our home, used it as our principal residence for the first two years.
9/27/1999 Rented out our home for the first time while overseas on official duty.
9/27/1999-12/31/2008 Tax laws stipulate all use can be considered as “qualified,” so I’m not providing details on this period. See 26 U.S.C., Section 121 (b)(5)(C)(i).
1/1/2009- New tax laws stipulated use can be considered as either qualified or nonqualified.
1/1/2009-6/30/2010 Rented out home while overseas on official duty.
7/4/2010-6/30/2011 Moved back into residence for one year.
7/1/2011-6/30/2014 Rented out home while overseas on official duty.
7/3/2014 to 4/29/2020 Moved back into residence and lived in it for 5+ years before selling it.
Thanks for any advice you can offer.
