Do we owe full capital gains on house (owned < 2 yrs) if we sold so husband could go to out-of-state medical school? I voluntarily transferred my work location.

[douglas41]

My husband and I lived in our house for about 1.5 yrs. My husband was working but was accepted to an out-of-state medical school. I was offered a remote position in that state so that I could be close to him. 

[Hal_Al · Accepted solution]

Going to college is not an unforeseeable event and does not qualify for an exception to the 2 year rule.
Whether you qualify for a work move depends on what you mean by "remote position". If you are being allowed to work at home, for the same employer you worked for at the old home location, that would not count as a work related move. If however you company assigned you to another office, even if for voluntary personal reasons, that counts as a job chance and you qualify for a home sale exclusion. Even though you were in the home less than two years, all the capital gain is excluded, up to a reduced amount (the maximum is $500,000 for a married couple meeting the two year rule. If you were only in your home 15 months [for example] you could only exclude up to $312,500 [15 / 24 x $500,000]).

[douglas41]

@Hal_Al   Hmm, let me add a few more details. During this time, I became pregnant and had a baby which increased our basic living expenses substantially. I had tried to live in the house without my husband after the baby was born but found it emotionally and financially untenable.

[Hal_Al]

From JK Lasser's Your Income Tax. section 29.4: "A sale does not qualify [for the health problems exception] merely to improve general health". "...you may qualify by showing that the of your situation 'facts and circumstances' of your situation establish that the PRIMARY [emphasis added] reason for the sale was a change in the placement of employment, health problem or unforeseen circumstances".

But, that's just my opinion.  It depends  on ALL the facts and circumstances .

[TaxGuyBill]

I agree with Hal_AL.  From what you have described, I don't see any exclusion, which means you will pay taxes on the Gain from the sale.

However, without doing any research on it, it is POSSIBLE that if your husband is a full-time student, that MIGHT possibly be considered his "job", which would qualify for the exclusion.

If you gain is large, you may want to go to a tax professional to research it, and/or submit a request for an IRS ruling on the matter (however, an IRS ruling can be very expensive).

[douglas41]

I will be consulting a tax professional on this issue, but I do want to be aware. Also, I find this interesting. If you don't mind I would like to re-visit my change of employment. My company policy dictates that teleworker positions are not allowed within a certain distance of a physical site. While in state A, I was offered a position of teleworker but this position mandated that my physical location be in state B. Taking this position initiated a job change notification documenting that my job location was changed from state A to state B. I even had to switch all my benefits to the new state. Does this qualify?

Also, although my husband's company was aware of his plans to go to medical school, they were the ones who terminated his employment early.

Lastly, IRS publication 523 states that an unforseeable event includes the following.

5. Became unable, because of a change in employment status, to pay basic living expenses for the household (including expenses for food, clothing, housing, medication, transportation, taxes, court-ordered payments, and expenses reasonably necessary for making an income).

My husband did have a change in employment status and we no longer had the two incomes necessary to pay for the house, especially considering that our living expenses increased during that time.

One of the above two points surely must apply to us.

[Hal_Al]

The only thing that’s sure is that none of those things SURELY apply to you. One, or more, may apply, subject to IRS interpretation.

[Anonymous]

In Pub. 523, the IRS says, "If you don't meet the eligibility test, you may still qualify for a partial exclusion of gain if you moved because of work, health, or an unforeseeable event."  https://www.irs.gov/publications/p523/ar02.html#en_US_2016_publink10009003

TurboTax will help you calculate the exclusion.