Sale of Principal Residence in CA - owned only two years

[Hoosier]

Client purchased house in CA for personal residence. Lived in it for one year and then moved to the midwest but retained ownership of the house and rented it out for one year. After the one year of rental sold it for a gain of $52k. Can the gain be excluded? thetaxbook page 6-19 rules seem to indicate no since the house was not lived in as personal residence for two years. Am I missing anything? CA preparers: Any California issues?

[New York Enrolled Agent]

Client purchased house in CA for personal residence. Lived in it for one year and then moved to the midwest but retained ownership of the house and rented it out for one year. After the one year of rental sold it for a gain of $52k. Can the gain be excluded? thetaxbook page 6-19 rules seem to indicate no since the house was not lived in as personal residence for two years. Am I missing anything? CA preparers: Any California issues?

IRC §121

(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.

[Lion]

Your client might qualify for a partial exclusion if his move was for unforeseen circumstances. Ask him why he moved and then you'll know whether to spend the time researching.

[taxea]

Your client might qualify for a partial exclusion if his move was for unforeseen circumstances. Ask him why he moved and then you'll know whether to spend the time researching.

He may also qualify for an allocated partial exclusion based on days used vs days owned. The balance would then go to the sale of the sale of rental calculations. Check the regs.

[Kram BergGold]

Agree with Lion

I agree with Lion. I have no idea what taxea is referring to. The only way to get a partial exclusion under Section 121 is if the seller qualifies for an exception to the two year test.

[taxea]

I agree with Lion. I have no idea what taxea is referring to. The only way to get a partial exclusion under Section 121 is if the seller qualifies for an exception to the two year test.

you may still be eligible for partial exclusion if you can show the main reason you sold your home was a change in workplace location, health issues, or an unforeseeable event.