Sale of House

[Tess]

My clients bought a house at the end of May 2005. They are going to sell around the end of May or beginning of June 2007. The reason for the move to another state is for education. This is not for employment, but maybe unforeseen circumstances. Do they have to pay capital gain?

[jainen]

the test case

>>Do they have to pay capital gain?<<

Probably (assuming they sell it for more than they paid). You don't accidentally go to college--it takes a bit of advance planning.

But if you are of my mind, and the clients are amenable, you might take the position that EVERYTHING is unforeseen. I mean, "Que sera, sera. The future's not ours to see." Someday the courts may rule that everybody is entitled to pro-rate the maximum exclusion. I would be delighted if YOUR client were the test case.

[Roberts]

There are many tax issues that would allow them the opportunity to avoid paying a capital gain on a home.

[GIMoe]

Capital Gain

My clients bought a house at the end of May 2005. They are going to sell around the end of May or beginning of June 2007. The reason for the move to another state is for education. This is not for employment, but maybe unforeseen circumstances. Do they have to pay capital gain?

IF (from the date of sale) the lived in the home for at least 2 of the past 5 years, have owned the home for at least 2 of the last 5 years, file MFJ and make less than $500,000 ($250,000 if MFS) of NET gain, then they should be able to exclude the gain and not pay taxes on it.