title>Tax Guru-Ker$tetter Letter Wizard Animation

                 

Tax Guru-Ker$tetter Letter
Thursday, March 09, 2006
 
Residence Lookback Timeframe

 

Q:

Subject: Primary Residence Sales Question?

Hi Kerry ,
 
How are you doing?
 
I have a question about the primary residence.
 
What if somebody live in the house for 2 yrs as primary residence and then rented for 3.5 yrs.
 
I know, he can take the tax exclusion , but he lived in the property in 2 out of 5.5 yrs (instead of 2 out of 5 yrs). Now, can he still take the exclusion?
 
Please reply me back.
 
Thanks,

A:

You may be misunderstanding the rules.  Extending the look-back time window to 5.5 years is not an option.

After you have been out of your home for more than 36 continuous months, it is no longer eligible for any of the Section 121 tax free exclusion as a primary residence.  The home has been converted into a rental, which would require the use of a 1031 exchange in order to avoid taxation.

Depending on how much hassle you want to endure to utilize the Section 121 exclusion, you could always move back in to the home and start adding personal use time in order to accumulate the necessary 24 months total out of the 60 months prior to the sale. 

Your personal tax advisor should be able to assist with this.

Good luck.

Kerry Kerstetter

 

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- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/09/2006 12:12:00 PM Send this post:

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