I have a client who resided in MN most of the year and snowbird in FL for the winters. He has owned both homes for 10+years. His wife passed away in Dec 2023 (they were already in FL for the winter). He sold his MN home in Oct 2024....no problem primary home eligible for the exclusion. He planned to continue to live in the FL home full time after his wife's passing. However, he decided that he did not feel comfortable continuing to live in that home without her, so sold the 2nd home in Nov 2024. My question is...Does the FL home become his now primary home after the sale of the MN home (for the time between the MN sale and the FL sale...47 days) and thus become eligible for a partial exclusion for the FL home sale?
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What makes him eligible for a partial exclusion? -
I was thinking that the FL home became his primary home after the sale in MN.....however since he took the primary exclusion with the last 2 years, cannot take it again, but one of the exceptions is unforeseen situations...including death of spouse...so I used the worksheet in PUB 523 to calculate the partial exclusion on the now new primary home......should I?Comment
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Further explained in 523 that the home became significantly less suitable as a main home for him (he felt he could not continue to live in the home after his wife passed) (didn't know he would feel that way until he did)Comment
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His wife passed away before the first house was sold - correct? I fail to see how "feeling bad" constitutes an unforeseen circumstance. I'll be honest - it sounds like a lame excuse to avoid tax.Originally posted by lady di View PostComment
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No the unforseen event was the spouse death within that 2 yr period and he is not remarried...The feel bad was just a continuation of the explanation of qualifying for a partial exclusion...he intended to keep this FL house as his primary home...the death is the exception to be able to claim primary residence exclusion within the 2 yr period with a partial exclusion. Yes, she died before the primary (MN) house was sold although I don't think that has anything to do with it as a surviving spouse. There is only a small amount of gain regardless on the FL house, so not a tax avoidance issue...just trying to complete it correctly.Comment
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My opinion is partial exclusion applies. Also, if jointly owned, don't forget stepup.Comment
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Nope. Regulation ?1.121-3(e)(2):
"A sale or exchange is deemed to be by reason of unforeseen circumstances (within the meaning of paragraph (e)(1) of this section) if any of the events specified in paragraphs (e)(2)(i) through (iii) of this section occur during the period of the taxpayer's ownership and use of the residence as the taxpayer's principal residence: ... Death" [of spouse]
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