@HYC wrote:
Thanks for the reply! Is there any document I need to provide to prove the 2 year/5year residency when filing the tax for them in the year they sell the house? Do they need to provide any utility bills, or should I provide my tax return (with their name as dependent to show)?
No, there is nothing that they or you need to prove on a tax return since the sale will not be reported on a tax return if the gains on the home are under the exclusion amounts.
Only if a Form 1099-S is issued to them at closing reporting the sale would they have to file a tax return reporting the sale to the IRS. There would not be any taxes owed due to the sale but the IRS requires the sale to be reported if a 1099-S is issued. There should not be a form 1099-S issued at closing, so this is just a heads up to you if there is.
