Conflicting Pub and Code? - Sec 121

[mactoolsix]

Taxpayer & previous wife built a primary residence 30 years ago. Wife passed away 10 years ago and taxpayer remarried nine years later.
The new wife was never put on title to the residence because of wealth & trust restrictions, and lived in the residence less than one year.
Now they sold.

Do they qualify for $250,000 or $500,000 exclusion?


Pub 523 states:
Special rules for joint returns. You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true.
• You are married and file a joint return for the year.
• Either you or your spouse meets the ownership test.
• Both you and your spouse meet the use test.
• During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home.”


USC 26 § 121
(d) Special rules
(1) Joint returns
If a husband and wife make a joint return for the taxable year of the sale or exchange of the property, subsections (a) and (c) shall apply if either spouse meets the ownership and use requirements of subsection (a) with respect to such property.

(my emphasis)

I know the code overrides the pub, but am I reading something incorrectly?

Thanks,
Mike

[Gary2]

I know the code overrides the pub, but am I reading something incorrectly?

Yes, you are. I suggest reading all of section 121 from beginning to end, which should make the issue more obvious. Or consider that when you take a quote of law out of context, and it refers to other subsections of the law, you must read those subsections as well to determine what it's really saying.

[New York Enrolled Agent]

A follow-up to Gary2's post.

The special rule in subsection (d) refers to subsections (a) and (c) only. Those parts permit an exclusion from gross income, blah, blah, blah.

However, the $500,000 exclusion limitation for married couples is found in subsection (b) which is not referenced in (d).

Subsection (b) requires one spouse to own and both to use. Thus, there is no inconsistency between the code & the pub.

[mactoolsix]

A follow-up to Gary2's post.

The special rule in subsection (d) refers to subsections (a) and (c) only. Those parts permit an exclusion from gross income, blah, blah, blah.

However, the $500,000 exclusion limitation for married couples is found in subsection (b) which is not referenced in (d).

Subsection (b) requires one spouse to own and both to use. Thus, there is no inconsistency between the code & the pub.

Thanks for that explanation!

Gary - it was not my intent to take anything out of context. I did refer to subsections (a) & (c), however I should have looked at what was not included in this special rule (b).

Mike