@mack12345 wrote:
Hi.
My spouse lived in the home I sold as his residence for 16 months immediately prior to the sale.
He was my spouse for 7 of those 16 months. It sounds like he meets the ownership through marriage even though the marriage overlaps only 7 months of my home ownership. Being we are in California, I now understand the community property publication. I didn't realize a home I acquired before marriage is considered community property in meeting ownership eligibility test for the cap gains exclusion.
Is that correct? And if so, then could he qualify for a partial exclusion for the 16/24 months if we file married joint?
If your spouse lived in the home as their main home for 16 months before the sale, they don't qualify for the full exclusion, because it was not more than 2 years.
They might qualify for a partial exclusion, but only if the home sale was due to one of the circumstances listed in publication 523 as qualifying for a partial exclusion. These include a job change of more than 50 miles, medical necessity, or other unforeseen circumstances that would have created a financial hardship to stay there. (In that case, they can exclude 16/24 or $166,666 and you can exclude $250,000. I'm not sure Turbotax handles that complicated an exclusion, we can test it if you think your spouse can qualify for a partial exclusion.)
See page 6. https://www.irs.gov/pub/irs-pdf/p523.pdf
