I have a new home and would like to know at what date my residence would qualify for an exclusion of $250,000 in capital gain?

Forum|Forum|6 years ago
June 1, 2019
2 replies
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I am planning to sell my primary residence.

I would like to know at what date my primary residence would qualify for an exclusion of $250,000 in capital gain.

Because this is a new construction situation, I am unsure of when the "ownership" and "residence" requirements began.

Here is the situation:

I purchased the building lot in September 2014.

I moved into the home on January 1, 2016 and have lived in it full-time since that date.

My construction loan matured and converted to a permanent loan on July 1, 2016.

I did not have an official certificate of occupancy until May 5, 2016. There were a few lingering issues that prevented full occupancy until that time. However, we were living in the home full-time.

When can I sell and avoid the $250,000 in capital gains? Since I was living in the home since January 1, 2016 would the 2 year "residence" and "ownership" clock have started then? How would this standup if I were audited?

Thank you in advance

MichaelL1

Employee

You will have your two years in for the exclusion on 12-31-2017 , as the ownership/residence clock would have started 1-1-2016 based on your facts above.

You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale. It doesn't have to be continuous, nor does it have to be the two years immediately preceding the sale.

For more detail see: https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Tax-Aspects-of-Home-Ownership--Selling...

The IRS question is a difficult one to answer. If you have some real doubts about the 1-1-2016 being valid, then to be safe you may want to consider the May date. Without knowing all the detail I can't give you a more detailed answer.

Carl11_2

Employee

You must have owned the home for at least two years (730 days or 24 full months) during the five years prior to the date of your sale.
The above statement isn't fully accurate.
You must have owned "AND" lived in the home as your primary residence for 730 days within the last 5 years (1826 days) you owned the home. The look back day count starts on the closing date of the sale.
The only thing I question is the fact that your CO was not issued until several months "after" you claimed you moved in. So I can't confirm if your lived in day count starts on 1 Jan 2016 or May 5, 2016. I would "think" that if questioned, if you could prove it was your primary residency on 1 Jan, that would be the start of your primary residence day count.
I do know that in my state/county, you can't get utilities turned on (Mainly electric) on new construction without producing a CO first.

TA in WI

Hi. I'm in the exact same situation and wondering how this turned out for you? Not getting a clear picture from the answers.

ReneeM7122

Your home sale qualifies for exclusion of $250,000 gain ($500,000 if married filing jointly) if all of the following requirements are met.

You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.
You didn’t acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years.
You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

@TA in WI