Question

1. Tom has owned his house for 20 years, and he paid $400,000 for it. In 2016 he married Gisele and she moved into the house, which remained their main residence until 2019. In late 2019, Tom sold the house (Gisele was not added to the ownership records) and moved to Tampa. The house was sold for $1,100,000. Neither Tom nor Gisele excluded the sale of another house in the last two years.  How much of the gain can be excluded for tax purposes?

	a.	$400,000
	b.	$0
	c.	$700,000
	d.	$500,000

Answer 1

Answer: (D) $ 500,000

However, if the gain is from your primary home, you may exclude up to $250,000 ($500,000 for married couples filing jointly) gain from income, if you meet certain requirements.

Criteria

1. You must meet the "ownership and use" test. Under this requirement, you must have owned the home for at least two years, and have lived in it as your primary residence for at least two years. This two-year period must be within the five-year period ending on the date you sold your home.
2. You did not exclude from your income the gain of a sale from another home during the two-year period ending on the date of the sale of the home for which the exclusion is being claimed.

Ownership:

If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement.