Three children Inherited home

[kparrott1]

When my mother pasted away in Oct 1997.  Her three children became equal owners of the home and we sold the home in May 2019.   One child lived in the home the entire time as their main residence. The other two children lived elsewhere the entire time.  We all three shared in the upkeep and property taxes of the home.  Home valve was $75k at death and $100K at sell.

Question:  Since the three children are listed as owners and one of the owners lived in the home the entire time.  Can all three of the children answer "Yes" to the question we lived in the home two of the last 5 yrs and not pay taxes, since the gains was less than $250K.  If the answer is no, it seems a bit strange that two children will pay capital gains on their portion of $25K and the one child will not. 

[MaryK4]

Unfortunately, you cannot claim the exclusion if you did not live in the home for the two out five years before the sale.  It does seem a bit unfair but the requirements must be met.

[NCperson · Accepted solution]

@kparrott1 - the IRS only permits you to have one primary residence at a time.  hence you have the benefit on the house you currently live in.  

is the $100,000 sales price before or after sales costs (like a commission).  you should calculate the gain after sales costs; did you all add any improvements over time that can be used to increase the $75,000 original price?

[kparrott1]

Thank you for your reply.  Good answer.  The 100k is the before sells cost.  I will be sure to deduct the closing cost and the like.  There were some upgrades made to the home some years ago, like kitchen cabinets and flooring, painting and roofing.  I'm not sure of the cost for any of these upgrades and I doubt my brother hung on to any receipts.  I would guess its not a good idea to estimate these cost.  

Thanks again 

[JohnB5677]

If audited it would be difficult to back up your costs. Best you can do is make a list of your improvements and use a reasonable cost estimate.