Question

Joe and Sue (married) sell their primary residence in 2018. They have live there since 1984. The selling price is 500000 Their basic of the home is 175000 What is their taxable gain?

Answer 1

There are three following tests in order to treat the gain from the sale of main home as tax-free up to $250,000 for individual/ $500,000 for married filing jointly.

• Ownership: One must have owned the home for at least two years during the five years prior to the date of your sale. It doesn’t have to be continuous, nor does it have to be the two years immediately preceding the sale.
• Use: One must have used the home and selling as principal residence for at least two of the five years prior to the date of sale.
• Timing: One must not excluded the gain on the sale of another home within two years prior to this sale.

From the given question, the above tests are fulfilled as

1.They are the owners greater than 2 years.

2. They used the home more than atleast two of the five years prior to the date of sale.

3. Assumed they didn't hold any other property other than existing.

Therefore the gain is 500000- 175000

=325000(less than 500000)

Therefore it is tax free. Hence no taxable gain.