Sect. 121 exclusion

[Bird Legs]

Client purchased a home in June, 1996. Lived in it until May, 2001, moved out and
converted it to rental. Sold the house in June 2003 and used the Sect. 121 to exclude the gain.
Client bought another house in May, 2002 and lived in it until August, 2004.
Sold it in Aug. 2004 and again used the Sect. 121 to exclude the gain, $27,620.
This was 2 years straight that Sect. 121 was used.
The purpose of selling the first home was because of relocating to another state for
employment.

[Roland Slugg]

Once every two years

Excluding the gain in 2004 was improper. The "change of employment" excuse for the 2003 sale can't be used for a partial exclusion of the 2004 gain.

[oceanlovin'ea]

Converted to rental

If he converted to rental, it shouldn't qualify for the exclusion should it.

Linda F

[Bill Tubbs]

No problem with the rental.

If he converted to rental, it shouldn't qualify for the exclusion should it.

Linda F

Linda, converting it to a rental for 2 years would not disqualify the Sec 121 exclusion. Sold in June 2003 -- look back 5 years, to June 1998. During the June 98 - June 2003, did the t/p live in and own the home for at least two years? Yes -- June 98 to May 2001 is more than two years.

Also, since the t/p meets the 2 of 5 rule with the first house, doesn't matter what the reason was that he sold. If the sale of the 2nd home was due to employement change (or such) though, then t/p could qualify for a pro-rated Sec 121 on 2nd home.

Bill