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eccentrichearts
Returning Member

How many months or days can we count for Capital Gains partial exclusion?

We bought our home in 2010. We moved 2/16/2017 for work. We signed a contract to sell our home finally on 8/31/2021. Does the day we sign the contract count as the end date or does the day it closes? I am trying to figure out if we count from 09/2016-2/2017 or do we only count to January since February was a partial month. Or cause it won't close to maybe October we count start from 10/2016. I am trying to figure out if we will owe capital gains or not. Thanks. 

5 Replies
pk
Level 13
Level 13

How many months or days can we count for Capital Gains partial exclusion?

@eccentrichearts , if you are talking about  exclusion ( from tax ) of gain  ( 250,000 for single , 500,000 for a married couple filing joint ), -- (a)  the property must have been owned  by at least one for  2 year and (b) have been used as  primary residence by both for at least 720  during last five years starting from the day the  property is sold ( closed ).

 

Note that if the property was used as income property ( rented out / available for rent  ) during the period when you did not occupy the property as your main residence, then  the depreciation allowable  ( whether recognized or not ) will adjust your basis in the property for computation of gain.   Also in such a case that portion of the gain equal to the depreciation allowable  is treated as ordinary gain and  remaining is capital gain ( eligible for  exclusion ).

 

Does this help  or do you need more  ?

 

Mike9241
Level 15

How many months or days can we count for Capital Gains partial exclusion?

there is no sale until there is a closing. the 5 year period ends on the day before sale. until the title transfers to the buyers you still own it so there is no sale.  

 

 

eccentrichearts
Returning Member

How many months or days can we count for Capital Gains partial exclusion?

Yes I was talking about exclusion but I read we could do a partial one if we moved because of work. So it said to count the amount of months or days, that was what I was trying to figure out. Once it closes then I will be able to figure it out I guess. It was not rented out because of health issues we only just got it in the condition to make it sellable. 

Opus 17
Level 15

How many months or days can we count for Capital Gains partial exclusion?

@eccentrichearts 

what’s interesting is that we usually think of the partial exclusion rule as applying to people who have to move out before they satisfy the two-year requirement, but after carefully reading publication 523, the worksheet used to calculate the partial exclusion does not contain this limitation. So if you moved out due to work, you can use the worksheet in publication 523 to claim a partial exclusion. In your case, you have to start with the date of the actual closing and then count back five years, and determine how many days you lived in the home as your main home during that five-year look back period.

 

Assuming you close around September 30, 2021, that look back period will go to September 30, 2016, which means you would have about 4 1/2 months residency out of the 24 month requirement, so you would qualify for about 1/5 of the normal exclusion amount. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Mike9241
Level 15

How many months or days can we count for Capital Gains partial exclusion?

the REGS 1.121-3 contains some examples where the taxpayer sold after a long period of not occupying it as a principal residence. they moved for a new job. the examples go on to say the taxpayer

is entitled to claim a reduced maximum exclusion under section 121(c)(2) because, under the facts and circumstances, the primary reason for the sale is the change in place of employment.

 

 

if you want to read about these look at examples 3 and 4

https://www.law.cornell.edu/cfr/text/26/1.121-3 

 

 

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