@AmeliesUncle wrote:
@djfunk wrote:
What if you have owned the home for 10 years, lived in it for the first 7, relocated due to job and rented it out for 3 years and 2 months before selling, can you still get a pro rated exclusion?
Yes, you can use the Reduced Maximum Exclusion if the circumstances of your job change while the house was your Principal Residence (assuming you meet the rules about the job change, such as the 50 mile rule).
https://www.law.cornell.edu/cfr/text/26/1.121-3
No. That section applies to people who move out early, after less than 2 years of ownership. It does not apply to people who move out late, after the expiration of the 3 year grace period.
Even if you tried to assert that 121.1-3(a) applied to both the 2 year ownership/residency rule and the 3 year grace period, you would be defeated by b(1) and b(4), "The sale or exchange and the circumstances giving rise to the sale or exchange are proximate in time;" and "The taxpayer uses the property as the taxpayer's residence during the period of the taxpayer's ownership of the property;" The sale (38 months after the job change) is not proximate in time to the job change and the taxpayer was not using the home as their main home.
