Residence Sale part 1

[Mark Goldberg]

I am back from my reading week with thoughts about residence sales. Here is the first.
Client owns a 2 family home. Lived in unit 1 for 2 years and rented out unit 2. Then moved to unit 2 for 2 years and rented unit 1. My understanding is, if client sells house the gain on only one unit can be excluded under 121 because this would constitute two sales. Agree or disagree?
Now, after 4 yerars what if client stopped renting unit 1. Client removes the stove and refrigerator from it and created a passaway from unit 1 to unit 2, and starts using the entire property as one residence. If client sells the house within 1 year would't 100% be eligible for 121?

[lsmith]

Residence Sale part 1

Agree with the 2 sales part. Your logic on the remainder sounds right as well. Yet, it could be that he would have to live in it for the 2 years instead of 1, since that part was converted to personal use. (I could be wrong on that part) and a remodel changed it from a 2 residence to a single residence.

[Jesse]

I am back from my reading week with thoughts about residence sales. Here is the first.
Client owns a 2 family home. Lived in unit 1 for 2 years and rented out unit 2. Then moved to unit 2 for 2 years and rented unit 1. My understanding is, if client sells house the gain on only one unit can be excluded under 121 because this would constitute two sales. Agree or disagree?

I am reading this as he is selling both units at once? Then I would agree that only one house can qualify for the section 121 exclusion.

Now, after 4 yerars what if client stopped renting unit 1. Client removes the stove and refrigerator from it and created a passaway from unit 1 to unit 2, and starts using the entire property as one residence. If client sells the house within 1 year would't 100% be eligible for 121?

I would agree with this senario as well, because now you no longer have two seperate structures but are selling one property that meets the two out of five year test.