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Outline_7C_Section_121_Exclusion

Outline_7C_Section_121_Exclusion - Outline 7C Section 121...

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Outline 7C Section 121 Exclusion on Sale of a Personal Resdience April 17, 2011 SALE OF A RESIDENCE: § 121 EXCLUSION Reading : Chapter 15--Sections 15.4 and 15.8 I. Requirements for exclusion treatment a) Principal Residence. a.i) The property must have been the taxpayer’s principal residence b) Ownership and Occupancy Requirements. b.i) At the date of sale, the residence must have been owned and used by the taxpayer as the principal residence for at least two years during the 5-year period ending on the date of the sale. c) The § 121 exclusion can be used only once every 2 years (i.e., not permitted for sales occurring within 2 years of its last use). d) PROBLEM: Maria owns two homes. The first home was her principal residence from January 1, 2002 to December 31, 2006. She rented it out from December 31, 2006 until she sold it on April 5, 2008. The second home was her principal residence from January 1, 2007 until the date she sold it on June 1, 2010. Do both sales qualify for Section 121 exclusion? d.i) Answer: No. Would have to sell it in 2009. Must have been two years since the previous use of the 121 exclusion. e) Exception to ownership and occupancy requirements and frequency of use requirement. e.i) Change in place of employment. e.ii) Health. e.iii) Unforeseen circumstances e.iv) The amount of the exclusion provided by this relief provision is calculated as follows: (e.iv.1.a) Number of qualifying months /24 months X 250k or 500k e.iv.1.a.i.1. QUESTION: Nancy who was single, purchased a home for $500,000 on 6/1/2007. She sold it for $800,000 on February 1, 2008 because she had a heart attack and decided to move to an assisted living facility. How much gain can she exclude?
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