TP purchased home in 2005 for which it was his primary residence till 2011 when TP converted it to rental then continued as rental 2011, 2012 & part of 2013 (total 1.5 yrs). Reading up on this Sect 121, I read one example that the 2 out of 5 years has to have ended the date of the sale. So was the TP supposed to have converted the rental back to TP residence prior to selling to qualify for the exclusion OR did TP qualify for the exclusion?
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From pub 523: To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.
I think you are reading this wrong. "ending on the date of sale" refers to the 5 year period and not to the 2 years. -
ec. 121. Exclusion of gain from sale of principal residence
(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.Comment
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So 5 yrs back from sale date
Ok, so 5 yrs prior to Oct 2013 (sale date) is Oct 2008. TP used as residence from Oct 2008 to Oct 2009, Oct 2009 to Oct 2010. Oct 2010 to Apr 2011. Rental from 4-2011 thru date of sale Oct 2013. If I am calculating this correctly, the TP qualifies to exclude the gain.Comment
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Can't exclude the depreciation. And, what are the new rules about disqualifying use after qualifying use, or is it before, and some proration? Haven't had one yet, so you'll have to look it up.Comment
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