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Old 09-09-2015, 05:03 PM
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When do the '2 years' begin, when inheriting a home?

Last year, in July, a family member passed away leaving me a house. 2 months later, in September, I moved into this house. Then, the deed was transferred 4 months after the death, in November. I have a reason to want to sell this home as soon as I can, but I also wish to avoid capital gain taxes.

I understand that the rule for real estate is that you must own a home and it must be your primary residence for 2 of the last 5 years in order to avoid capital gains, up to $250,000.

My question: Did the 2-year clock start ticking at the date of death, the date I moved in, or the date the deed was transferred? I've read through 121(d) and cannot find the answer. Any help you could provide would be AWESOME.



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Old 09-09-2015, 06:02 PM
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I understand that the rule for real estate is that you must own a home and it must be your primary residence for 2 of the last 5 years in order to avoid capital gains, up to $250,000.===>Correct ;up to $250K for MFS/ $500K for MFJ filers.To qualify, you as you said must have owned and occupied their principal residence an aggregate 2 of the 5years before the home sale.
The normal basis for the inherited home is its value on the date of death for the decedent who bequeathed it. The basis for an inherited business is allocated among the various business assets.



My question: Did the 2-year clock start ticking at the date of death, the date I moved in, or the date the deed was transferred? I've read through 121(d) and cannot find the answer. ==============>>>the date the deed was transferred.you NEED to own a home as you must own and occupy the home as your principal residence





To meet the use test, it must have served as your primary residence for at least 2 of the 5 years. However, the ownership and use periods don't have to be the same two years.



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Old 09-11-2015, 09:38 AM
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Quote:
Originally Posted by Wnhough View Post
.

I understand that the rule for real estate is that you must own a home and it must be your primary residence for 2 of the last 5 years in order to avoid capital gains, up to $250,000.===>Correct ;up to $250K for MFS/ $500K for MFJ filers.To qualify, you as you said must have owned and occupied their principal residence an aggregate 2 of the 5years before the home sale.
The normal basis for the inherited home is its value on the date of death for the decedent who bequeathed it. The basis for an inherited business is allocated among the various business assets.



My question: Did the 2-year clock start ticking at the date of death, the date I moved in, or the date the deed was transferred? I've read through 121(d) and cannot find the answer. ==============>>>the date the deed was transferred.you NEED to own a home as you must own and occupy the home as your principal residence





To meet the use test, it must have served as your primary residence for at least 2 of the 5 years. However, the ownership and use periods don't have to be the same two years.
Many thanks for your thoughtful answers and time!



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