Sale of condo after sale of primary residence

[MikeyD5]

We sold our primary residence of 20 years in 2020. In 2013 we bought a condo for casual use on weekends throughout the years. We did rent the condo for 1 year during time we owned it. After selling our primary residence in 2020, we moved into our condo and lived there for 12 months prior to selling it and building our current home.  So, the question is about the treatment of the sale of the condo. Because we did not live in it as our primary residence for 2 years must the gains be treated as long term capital gains? We did however live in it for many weekends throughout the 8 years we owned it.  Must this condo sale be treated as capital gains or can the gains be included into the $500K exclusion?

[Vanessa A · Accepted solution]

The sale of the condo would be treated as a capital gains sale since you did not live in it for 2 out of the 5 years before the sale. Spending weekends at the home would not make it a primary residence, it would make it a second home which the sale of a second home is treated as the sale of an investment property subject to capital gains. 

You would still enter it as a home sale using your form 1099-S.  You will be asked whether you ever rented the home or was it used for anything other than your residence.  Answer yes, that you used it as a rental to make your reporting of the sale the most accurate. 

To enter the Sale of a Home select the following:

• Federal
• Income
• Sale of Home under Less Common Income