Publication 523 and the Intelligence Community

[alireadrean]

I sold a primary residence in May 2023 after living there for 5 years. I made less than 500,000 off the sale, filed taxes jointly with my wife, and thus did not pay capital gains tax. 

After I sold that home, I bought another home (my new primary home) in June 2023, where I live in it full time with my wife. 

I plan to sell this primary home after living it in for 1 year, but before reaching the two-year residence requirement, so that I can buy another primary home in another state.

I am a civilian member of the Intelligence Community, as outlined in IRS Publication 523, and I am moving to a new duty station for work (greater than 50 miles away). 

Assuming capital gains are less than $500,000, do I qualify for a capital gains exemption, given that I sold a primary home in 2023, bought a new home the same year, and plan to sell that second primary home after living in it for 1 year (but less than 2 years) ?

Again, this move will be to another intelligence community duty station.

Any help is appreciated!

[DoninGA]

Since you are moving for work then you will be able to use the Partial Exclusion on any gain on the sale of your residence.

If you lived in the home for 1 year then your partial exclusion is 12/24 of the gain on the sale.

So if Single the exclusion would be $125,000 and if Married Filing Jointly and both of you lived in the home the exclusion would be $250,000.

[alireadrean]

Tracking the partial exclusion, but am I eligible for full exclusion given the intelligence community carve out in Publication 523 (Service, Intelligence, and Peace Corps personnel)?

[DoninGA]

If you have only owned the home for one year, are you expecting a gain of over $250,000 if married filing jointly under the partial exclusion?  Or $500,000 under the full exclusion?

If you are qualified for the full exclusion as described in Publication 523 on page 4 under the the heading of Service, Intelligence, and Peace Corps personnel then you can take the full exclusion.

[Opus 17]

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@alireadrean wrote:

Tracking the partial exclusion, but am I eligible for full exclusion given the intelligence community carve out in Publication 523 (Service, Intelligence, and Peace Corps personnel)?

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[Edited]

I understand the confusion, but that's not what the suspension means.  You can suspend the requirement that you live in the home for 2 of the past 5 years.  (That allows you to move away and wait more than 3 years before selling.) Look at the examples on page 5.  The suspension rule doesn't change the basic requirement to own the home for 2 years, it changes how the 2 years are calculated. 

You can also never claim an exclusion twice in less than 2 years (section 121-2b), unless you qualify for a partial exclusion in section 121-3.  The foreign service suspension requirement in section 121-5 does not allow you to claim a full exclusion twice in 2 years. 

See 

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRb467872627553f...

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRb467872627553f...

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRb467872627553f...

You still qualify for the partial exclusion because you are selling due to a work-related move. 

The partial exclusion is figured based on the shortest of 3 periods:

a. how long you lived in the home as your main home, 

b. how long you owned the home, or

c. how long between the sale of the previous home where you used the exclusion and this home,