A taxpayer who sells a principal residence that has been used as a rental property after 2005 will not be allowed to exclude the portion of the gain attributable to depreciation even if the taxpayer meets the ownership and use tests and the gain realized on the sale is lower than the maximum exclusion amount.

Question

A taxpayer who sells a principal residence that has been used as a rental property after 2005 will not be allowed to exclude the portion of the gain attributable to depreciation even if the taxpayer meets the ownership and use tests and the gain realized on the sale is lower than the maximum exclusion amount.

Quizplus · Accepted Answer

This statement is true according to IRS rules. If a taxpayer has used a principal residence as a rental property after 2005, they will not be able to exclude the portion of the gain attributable to depreciation, even if they meet the ownership and use tests and the gain realized on the sale is lower than the maximum exclusion amount. This is because the depreciation taken on the property during the rental period reduces the taxpayer's basis in the property, resulting in a higher gain upon sale.

A Taxpayer Who Sells a Principal Residence That Has Been