On February 1, 2017 Stephen (who is single) sold his principal residence (home 1) at a$100,000 gain. He was able to exclude the entire gain on his 2017 tax return. Stephen purchased and moved into home 2 on the same day. Assuming Stephen lives in home 2 as his principal residence until he sells it, which of the following statements is true?

Question

Quizplus · Accepted Answer

Stephen may be able to exclude the gain on home 2 in certain circumstances. If he meets the ownership and use tests, he can exclude up to $250,000 ($500,000 if married filing jointly) of gain on the sale of his principal residence. However, if he sells home 2 in 2018, he would not meet the ownership and use tests for the full 2-year period required for the exclusion. Therefore, option B is incorrect. Option C is also incorrect because there is no fixed time period for which Stephen needs to wait to sell home 2 in order to be eligible for the exclusion. As long as he meets the ownership and use tests, he can exclude the gain on the sale of his principal residence. Therefore, the correct answer is A.

On February 1, 2017 Stephen (Who Is Single) Sold His