We sold a home in May 2021 after renting it out for a year. We did not live in it for two years and understand we qualify for the partial exclusion due to military PCS.
this is from the IRS REGs 1.121-(3)(c)
Example 3.
C is employed by Employer R at R's Philadelphia office. C purchases a house in February 2002 that is 35 miles from R's Philadelphia office. In May 2003 C begins a temporary assignment at R's Wilmington office that is 72 miles from C's house, and moves out of the house. In June 2005 C is assigned to work in R's London office. C sells her house in August 2005 as a result of the assignment to London. The sale of the house is not within the safe harbor of for job change of this section by reason of the change in place of employment from Philadelphia to Wilmington because the Wilmington office is not 50 miles farther from C's house than is the Philadelphia office. Furthermore, the sale is not within the safe harbor by reason of the change in place of employment to London because C is not using the house as her principal residence when she moves to London. However, C is entitled to claim a reduced maximum exclusion under section 121(c)(2) because, under the facts and circumstances, the primary reason for the sale is the change in C's place of employment.
note that before the exclusion applies you must recapture andy depreciation allowed or allowable while a rental unit
I plan to retire from the military and sell our current home in May 2022 (owned and lived in over 2 years). We will move across the country to my original home-of-record state. My spouse does not work. will you be working after moving this second time?
since you used a partial exclusion on the first sale and this sale is within two years of the first you at most will qualify for another partial exclusion. but only if you move is for a job change, health reasons or unforeseen.
circumstances.
the second partial exclusion if available is computed as follows
during the 5 years before sale
the longest period in the 5 years by either spouse
1) Assuming both live in it max exclusion $500,000
2a) number of days (months) - use of days or months must be consistent as main home ______________
2b) number of days (months) owned ______________
2c) smaller of 2a or 2b ----------------------
3) number of days (months) since last home sale exclusion used (period between sales) _____________
4) smaller of 2c or 3 _______________
5) divide line 4 by 730 if using days or 24 if using months to 3 decimal places ___________
6) line 1 times line 5 - maximum exclusion _____________
you can make an election not to use the gain exclusion on either property. you do this but not taking the exclusion. You may want professional help in determining what is your best option.
