The original question did not specify whether the trust was revocable or irrevocable. Thus, the reply only provides a partial answer to the question and is correct in stating that an irrevocable trust does not qualify for a Section 121 capital gains exclusion. However, if a house is held by a revocable trust and served as the principal residence for at least 2 out of the preceding 5 years as the tax filer’s (trust owner’s) principal residence, it fully qualifies for the Section 121 exclusion ($250,000 for single and $500,000 for married filing jointly). The grantors of a revocable trust are considered the owners of the property for Federal tax purposes.
