Hello.
First of all, I should note that Google Answers provides general
information. The information below is not, and should not be viewed
as, a substitute for professional legal or tax advice.
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The basic rule is that you have to live in the home (and make it your
principal residence) for 2 years or more out of the 5-year period
prior to the sale.
From the Internal Revenue Code:
"(a) Exclusion.
Gross income shall not include gain from the sale or exchange of
property if, during the 5-year period ending on the date of the sale
or exchange, such property has been owned and used by the taxpayer as
the taxpayer's principal residence for periods aggregating 2 years or
more."
source:
Section 121. Exclusion of gain from sale of principal residence,
hosted by findlaw.com
http://caselaw.lp.findlaw.com/casecode/uscodes/26/subtitles/a/chapters/1/subchapters/b/parts/iii/sections/section_121.html
Be aware that Section 121 has certain exclusions. For example, if
you've been taking depreciation deductions on the rental property, the
gain exclusion does not apply to the extent of depreciation taken
after May 6, 1997.
See Internal Revenue Code 121(c)(6)
"(6) Recognition of gain attributable to depreciation
Subsection (a) shall not apply to so much of the gain from the sale
of any property as does not exceed the portion of the depreciation
adjustments (as defined in section 1250(b)(3)) attributable to periods
after May 6, 1997, in respect of such property."
source:
Section 121. Exclusion of gain from sale of principal residence,
hosted by findlaw.com
http://caselaw.lp.findlaw.com/casecode/uscodes/26/subtitles/a/chapters/1/subchapters/b/parts/iii/sections/section_121.html
There's a good explanation of all this in "The Home Sale Gain
Exclusion," from aicpa.org
http://www.aicpa.org/pubs/jofa/oct2002/foran.htm
Also see:
"IRS Finalizes Exclusion Rules For Sale of Principal Residence", from mobar.org
http://www.mobar.org/journal/2003/marapr/taxes.htm
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search strategy:
irc, exclusion, gain, residence
"section 121" rental exclusion, gain, residence "two years"
I hope this helps. |
