IRS 121 exclusion

[fustauto]

Hello,

Not too sure where to find an answer to my question. We purchased a cabin home in CA in 2019. When everything was shut down during covid we stayed in our cabin for a little over 2 years (2020-2022). We would come up and check on our other home every other weekend to get mail and make sure everything was ok. My question is I don't know how to prove we lived in the home. All of our mail was routed to the other home and we moved all bills to online. I'm asking because we sold our cabin in Aug of 2023 and had a gain on the sale. The gain is approx. $80k. I don't know how to exclude the gain under IRS regulation 121 if I didn't change my address on tax returns, drivers license or voting. Is there anything I can do?  

[rtfletcher841]

I suppose you received a 1099-S for the sale. Would your utility bills for the cabin and home prove that you were residing at the cabin during that time frame? Low usage at the home you weren't living in and higher usage at the cabin?

[AmeliesUncle]

IF it was your "Principal Residence" during that time, you report the sale in the 'Sale of Home' section.

You will have "Nonqualified Use".  The essentially means will still pay some tax because it is prorated based on the time it was your Principal Residence (the prorated portion for the time you owned it before it became your Principal Residence will be taxable).

Be aware that IF this cabin was your Principal Residence during that time, that means your current home was NOT your Principal Residence, so you will again have "Nonqualified Use".  That means whenever you sell your current home the 121 Exclusion will be prorated and part of the sale will be taxable.

[fustauto]

Hi! Thank you… it was never meant to be a primary home. But covid came along and everyone (kids included) all worked/did schooling remotely. Worked out perfectly for our situation for distancing ourselves. We didn't change addresses on ID’s because there isn’t a mailbox and we had all utilities sent to us online. I understand the proration just didn’t know how to prove it in case of audit. Thanks! 

[fustauto]

Interesting that we didn’t get a 1099-S, we just received a 530 form from the escrow company. Good point on the utility bills… I have those.