Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2017, enters into a contract to sell on July 12, 2017, and sells (i.e., the closing date) the residence on August 1, 2017. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Evelyn as the principal residence for at least two years during the prior five-year period?
A)February 7, 2017.
B)July 12, 2017.
C)August 1, 2017.
D)December 31, 2017.
E)None of the above.

Question

Quizplus · Accepted Answer

The appropriate ending date in determining if the residence has been owned and used by the taxpayer as the principal residence for at least two years during the prior five-year period is the closing date, which is August 1, 2017, in this case. This is because the taxpayer satisfies the ownership and use tests if they own and use the property as their principal residence for two out of the five years ending on the sale date. Since the sale date is August 1, 2017, the five-year period ends on August 1, 2012, and the two-year period ends on August 1, 2015. As such, August 1, 2017, is within the two-year period, and therefore, the taxpayer satisfies the ownership and use tests.

Evelyn, a Calendar Year Taxpayer, Lists Her Principal Residence with a Realtor