On February 1, 2014 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 2014 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

Under the tax code, a taxpayer can exclude up to $250,000 ($500,000 for married taxpayers filing jointly) of gain from the sale of his or her principal residence if certain requirements are met, including owning and using the property as a principal residence for at least two out of the five years before the sale. In this case, Stephen met the two-year ownership and use requirement for home 1, so he was able to exclude the entire gain on his 2014 tax return. If he continues to own and use home 2 as his principal residence for at least two out of the five years before its sale, he can exclude up to $250,000 of gain from the sale of home 2 (assuming he meets the other requirements). Therefore, option C is the correct answer.

On February 1, 2014 Stephen (Who Is Single) Sold His