The ownership rule is quite clear.
- As long as you owned and lived in the home for two of the five years before the sale, up to $250,000 of profit is tax-free. And if you’re married and file a joint return, that amount doubles to $500,000.
Since the home was technically owned by the LLC, and if you are not in a community property state, then you should wait the two year period to sell if you want to be allowed a home exclusion.
A Limited Liability Company (LLC) is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner's tax return (a "disregarded entity").
Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses (was not elected when established).
- Nine states—Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona—have community property statutes that affect a married couple's federal income tax return.
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