Larry owned and lived in a home for five years before marrying Darlene. Larry and Darlene lived in the home for one year before selling it at a $600,000 gain. Larry was the sole owner of the residence until it was sold. What is the maximum amount of gain that Larry and Darlene may exclude?
A)$0.
B)$250,000.
C)$500,000.
D)$600,000.

Question

Quizplus · Accepted Answer

Larry and Darlene can exclude up to $250,000 of the gain because Larry meets both the ownership and use tests (owned and lived in the home for at least 2 out of the last 5 years). They cannot exclude $500,000 because Darlene does not meet the use test, and they are not eligible for the $600,000 exclusion as it exceeds the maximum exclusion for single filers.

Larry Owned and Lived in a Home for Five Years