In certain circumstances, a taxpayer who does not meet the ownership and use tests may still be allowed to exclude the entire realized gain on the sale of a principal residence.

Question

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This is known as the "unforeseen circumstance" exception, and it applies if the sale is due to a change in employment, health reasons, or unforeseen circumstances such as a divorce or multiple births resulting in a need for a larger home. Certain qualifications and requirements must be met for this exception to apply.

In Certain Circumstances, a Taxpayer Who Does Not Meet the Ownership