Discussion:Section 121 question . . .
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Discussion Forum Index --> Basic Tax Questions --> Section 121 question . . .
Discussion Forum Index --> Tax Questions --> Section 121 question . . .
| 8 March 2008 | |
| Womans buy home in 2001. In 2003, after living there for two years, she marries, and she and her new husband buy a new home, and they get a renter for her old home. She sells her old home in 2005, meets the Section 121 requirements (2 of 5), and sales the home for $125000, all the gain excluded under Section 121.
So far, fine. Now in 2007, they sale their new home. Unfortunately, they sold this home less than 24 months after they sold her old home. Are they out of luck with the Section 121 exclusion, since you CAN NOT | |
Death&Taxes (talk|edits) said: | 8 March 2008 |
| This depends on amount of gain. Husband would be entitled to a 250,000 gain, since he did not sell a residence within two years if I read you right. If gain is over 250K, tax will be paid on gain over that. | |
| 8 March 2008 | |
| Wow, what happened. I was typing along, when suddenly WHAMMO, my question got sent.
Anyway, to start over: Womans buy home in 2001. In 2003, after living there for two years, she marries, and she and her new husband buy a new home, and they get a renter for her old home. She sells her old home in 2005, meets the Section 121 requirements (2 of 5), and sales the home for $125000, all the gain excluded under Section 121. So far, fine. Now in 2007, they sale their new home. Unfortunately, they sold this home less than 24 months after they sold her old home. Are they out of luck with the Section 121 exclusion, since you CAN NOT use it again until 2 years have passed? Hmmmm. I don't see where you use $125000 one year, then another $125000 the next year. Wonder if it could make a difference that she used her $250,000 on the HER old home, and now they can use HIS $250000 on the new home. I HOPE THERE IS A WAY OUT THIS. Any help here appreciated. (I think the only hope is if they had to move, which will be hard to prove!)
since you CAN NOT use the Section 121 again until 2 yesrs has passed since you last used | |
Death&Taxes (talk|edits) said: | 8 March 2008 |
| As I said above, did THEY sell the old home, or did SHE sell her old home? If the latter they can skate but if she was nicey-nice and put his name on deed of the old, then your analysis sounds correct. | |
| 8 March 2008 | |
| So Death, are you suggesting that if his name was NOT on the deed, then if she sold HER old home (even though now married), that this may not affect the use of Section 121 with this NEW home that they own together but sold within 24 months of the sale of HER home?
If correct, I hope I can find something to support it. Thanks Death for your input. | |
| 8 March 2008 | |
| Good question. I don’t think there is any problem with claiming a $250,000 exclusion if they file a joint return. See Internal Revenue Code §§ 121(b)(2)(B) and 121(d). | |
Death&Taxes (talk|edits) said: | 8 March 2008 |
| Assuming his name was not on the old home that she originally had, and assuming the gain was less than 250K, they should be okay.....I first worked thru the numbers on software then read the Code....but any gain over 250,000 is taxed. Remember, in a slightly different situation, both don't have to own the house as long as both meet the conditions of two years use and no gain taken in two years. The exclusion is not 500K, but two gains of 250K in a MFJ situation.
If his name were on the old house, then both sold a house within two years. That is where I see the problem. Yet to expand on this, he could not have used an exclusion on the old house since he did not live in it 2 years, so he could not have taken the exclusion on the sale of another house.....she was the only one who would be disqualified. So I think you are okay. | |
| 8 March 2008 | |
| question: Did she reclaim the depreciation on Schedule D for the time she rented from 2003 - 2005? the gain should/would have been excluded, except for the amount of depreciation, if all the Sec 121 rules were met.
6) RECOGNITION OF GAIN ATTRIBUTABLE TO DEPRECIATION Subsection (a) shall not apply to so much of the gain from the sale of any property as does not exceed the portion of the depreciation adjustments (as defined in section 1250(b)(3)) attributable to periods after May 6, 1997, in respect of such property.
What are the reasons for selling the home in 2007? | |
