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Old 12-26-2013, 04:54 PM
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Selling Homes / capital gains Exemption

My wife and I who file jointly are planning on selling our current rental property in March which we can exclude the capital gains tax since I lived there for approx. 2.5 of the last 5 years.

I was wondering if I then sold our current primary residence in May (selling two properties in one tax year) provided that I used that property for my primary residence for 2 of the last 5 years could I also exclude the gains from that sale in the same tax year provided it's below the $500k limit?

Can you exclude the capital gains from more then one property sale in the same tax year provided it is under the 500k joint limit?

Thanks,

Sean



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Old 12-26-2013, 06:46 PM
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Originally Posted by sogorman View Post

#1;I was wondering if I then sold our current primary residence in May (selling two properties in one tax year) provided that I used that property for my primary residence for 2 of the last 5 years could I also exclude the gains from that sale in the same tax year provided it's below the $500k limit?

#2;Can you exclude the capital gains from more then one property sale in the same tax year provided it is under the 500k joint limit?

Thanks,

Sean

#1; since you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time as said above. In a Private Letter Ruling , the irs indicated that if a taxpayer uses more than one property as a primary residence, the one that qualifies as the "principal residence, depends on a two-prong test.First, the taxpayer must use the residence as a principal residence, which is largely based on a facts and circumstances test.According to Treasury Regulation, several factors the IRS evaluates to help determine this part of the test include the following:The time spent in a residence ;The taxpayer's place of employment ;The principal place of abode of the taxpayer's family members ;The address listed on the taxpayer's federal and state tax returns, driver's license, automobile registration, and voter registration card ;The taxpayer's mailing address for bills and correspondence ;The location of the taxpayer's banks ;The location of religious organizations and recreational clubs with which the taxpayer is affiliated. Secondly, after your principal residence has been determined, the number of days that you actually occupied the residence is added up to determine if you have met the two year statutory requirement.


#2; As mentioned above.



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