Michael (single)purchased his home on July 1, 2010. He lived in the home as his principal residence until July 1, 2018, when he moved out of the home, and rented it out until July 1, 2019, when he moved back into the home. On July 1, 2020, he sold the home and realized a $360,000 gain. What amount of the gain is Michael allowed to exclude from his 2020 gross income?

Question

Quizplus · Accepted Answer

Michael owned and lived in the home for at least 2 out of the 5 years prior to the sale (July 1, 2010 - July 1, 2018). He also moved back into the home and lived in it for at least 2 additional years prior to the sale (July 1, 2019 - July 1, 2020). Therefore, Michael meets the ownership and use tests for the primary residence exclusion under Section 121 of the IRS Code. He is allowed to exclude up to $250,000 of the gain from his gross income.

Michael (Single)purchased His Home on July 1, 2010