Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2014, enters into a contract to sell on July 12, 2014, and sells (i.e., the closing date) the residence on August 1, 2014. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Evelyn as the principal residence for at least two years during the prior five-year period?

Question

Quizplus · Accepted Answer

The appropriate ending date for determining if the residence has been owned and used by the taxpayer as the principal residence for at least two years during the prior five-year period is the closing date, which is August 1, 2014 in this case. This means that Evelyn satisfies the ownership and use test for the sale of her principal residence and can exclude up to $250,000 ($500,000 if married filing jointly) of the realized gain on the sale.

Evelyn, a Calendar Year Taxpayer, Lists Her Principal Residence with a Realtor