Sale of 2 Residences same year.

[Unregistered]

1.Taxpayer owned and lived in residence #1 for 20 years. Approximate gain is $100,000 when sold and meets all requirements to exclude gain.

2.Two+ years ago taxpayer bought and moved to owned residence #2. Approximate gain is $20,000 when sold and meets all requirements to exclude gain.

Taxpayer has a contract for sale on both homes in the current year and expects closing in the same year.

Obviously taxpayer would like to claim §121 on residence #1 and pay tax on gain of residence #2.

Does it make a difference in which residence is sold first (closing date) in order to claim the exclusion on residence #1? Or can the closing date be ignored and the taxpayer pick which one to exclude the gain?

[DonPriebe]

Your choice

The Section 121 exclusion is optional - you can choose to take it or not. Take it on the house with the most gain and pay taxes on the other one. See Pub 523, page 9.

[Gene V]

Also, while your reading Pub. 523, look at page 3-talks about More than one home and page 16.

[Unregistered]

Both residences were the main home for 2 years within the 5 year window and both qualify for possible exclusion.

I read pub 523 with the pages cited, but I'm still not clear if a sale (and closing date) for residence #2 is dated first with sale reported and taxed, would that keep the taxpayer from claiming exclusion on the sale and closing of residence #1 that is not the current residence?

[Gene V]

If you go by page 3, the home you live in the longest in the past 5 years would be you main home. This would qualify for the 121 exclusion, but since both homes qualify for the two out of five years, I would use whichever home benefits you the best. Just my opinion.

[Nancy]

IRC section 121(f)

Code section 121(f) allows a taxpayer to elect not to apply the exclusion rules to a sale (even if the sale would be eligible for the exclusion). This allows the taxpayer to "choose" which sale to apply the exclusion rules to if two sales both meet the exclusion rules.

You make the "election" by reporting the sale on the home you do not want the exclusion rules applied to. So, if both home qualify for the exclusion, report the sale of the home with the smaller gain.