Since it is the primary residence for the daughter, the daughter is allowed to exclude $250,000 of gain on the sale as long as she meets the other requirements of
There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free:
If the mother also meets these tests she could also exclude up to $250,000 of gain on the sale of the coop.
Link to Tax Aspects of Home Ownerhip
- Ownership: You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale. If you lived in a house for a decade as your primary residence, then rented it out for two years prior to the sale, for example, you would still qualify under this test.
- Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
- Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.
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