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  1. #1
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    Feb 2017
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    Default Can You Claim the Capital Gains Exception for a Second Home, Not Your Primary Home

    Mom has 2 homes 2 miles apart. Sister has lived in the older house for 20 years without rent or paper trail. Sister has cable, and Edison in her name and water is in my moms. Closets and garage are all mom's property at the older home. Mom has NOT used her one capital gain credit, neither home has a mortgage. The older home has a 250k gain if sold.....Is it posable to "record" the older home as mom's primary resident so she can sell it and waive the CG?

  2. #2
    Join Date
    Mar 2013
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    17,809

    Default Re: Two Homes Which One is Primary for Capital Gain Exemption

    Quote Quoting mamerc
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    Is it posable to "record" the older home as mom's primary resident so she can sell it and waive the CG?
    No.

    The IRS has some very strict rules on how to determine what one's "main home" is for the purpose of the capital gains tax.

    See Page 3 of IRS Publication 523 Selling Your Home:

    https://www.irs.gov/pub/irs-pdf/p523.pdf

    If Mom and sister want to swap houses and Mom is willing to live there exclusively for the ensuing 24 months it will have been her "main home" for the purpose of excluding $250,000 of the gain.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,861

    Default Re: Can You Claim the Capital Gains Exception for a Second Home, Not Your Primary Hom

    Quote Quoting mamerc
    View Post
    Mom has 2 homes 2 miles apart. Sister has lived in the older house for 20 years without rent or paper trail. Sister has cable, and Edison in her name and water is in my moms. Closets and garage are all mom's property at the older home. Mom has NOT used her one capital gain credit, neither home has a mortgage. The older home has a 250k gain if sold.....Is it posable to "record" the older home as mom's primary resident so she can sell it and waive the CG?
    Prior to 1997, there was a rule that excluded a portion of a gain on home for taxpayers over age 55. This was a gain exclusion that could only be used once during the lifetime of the taxpayer. That rule is gone and replaced with a more generous provision that may be used a number of times during the taxpayer’s life and may be used regardless of the taxpayer’s age. However, in order to get the gain exclusion, your mother must have not only owned the home, but also lived in the home as her principal residence at least two of the five years immediately preceding the date of sale of the home. How much gain exclusion she’d get depends on how much of the five years she lived in it prior to the sale of the home. Jack provided a link to IRS Publication 523. Read the publication carefully. It explains all the rules in there.

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