Home sale capital gain exclusion

[chiaros]

A couple marries ins 2023. The wife has a revocable trust which owns the home they've lived in for over 10 years. The trust is updated to a family trust which now includes the husband. In 2024 the home is sold. They will be filing jointly for their 2024 taxes. Will they qualify for a married couples' $500,000 capital gains exclusion?

[Mike9241 · Accepted solution]

based on what you provided the full $500K is available but see the last sentence. The rules require that one OR both spouses own it for 2 out of 5 years before the sale. The wife's ownership for over 10 years meets this test.

The other test is they both occupy it as their principal residence for 2 out of 5 years before the sale. This test is met.

the other important thing is that you are married on the date of sale. otherwise, your ex-husband would not meet the ownership test. you could not file jointly with him so the exclusion would only be yours $250K   

I should also mention you need to be married on 12/31 of the year of sale so you can file jointly. 

[NCperson]

@Mike9241 how does the husband meet the residency test? they just got married (and presmably he just moved into the home - admittedly, it is not stated when he moved in) did not live in the house for 24 months prior to the sale. 

[Mike9241]

@NCperson it is stated as follow in the thread "they lived in for over 10 years". taking her at her word that "they" means both and not just her. perhaps they got legal advice to get married so they would qualify for the maximum exemption. under the laws occupancy and ownership periods do not have to coincide.  

[chiaros]

Thanks for the clarity.