Question

CA Capital Gains Lived in Home 5 years but owned it less than 2

Forum|Forum|6 years ago
September 12, 2019
2 replies
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I have a unique situation. My mom bought a house and put it in her name since I didn’t qualify. I’ve been living in it for 5 years and paid her the mortgage and property taxes every month and she paid them directly. I just finally bought it from her a few months ago but now I would really like to sell and use the equity for a down payment on a new house. I know you have to live in the home as a primary residence for 2 years which I have far exceeded but the whole time it was under my mom’s name nothing was in my name except utilities. Since I have been living here for 5 years and have proof of it is it possible to avoid capital gains?

A

Anonymous_

Employee

@TiffanyRM wrote:

...Since I have been living here for 5 years and have proof of it is it possible to avoid capital gains?

No, because you do not pass the ownership test (two years) that would otherwise qualify you to claim the Section 121 exclusion of up to $250,000 of gain.

You might, somehow, be able to qualify for a partial exclusion (see link below) but that seems doubtful based upon the facts you provided.

https://www.irs.gov/publications/p523#en_US_2018_publink100073096

As a footnote, did you pay fair market value for the house? It seems a bit odd that you would have a large gain on a house you just purchased a few months ago.

A

Anonymous

one might even expect a loss when taking into account closing costs if bought a few months ago at FMV.

Critter

Employee

In reference to gains on the sale of your home where you did not live or own the home for at least two years during the five years from the date of sale, a Partial Exclusion May Be Available - See IRS Publication 523 Selling Your Home page 4 - http://www.irs.gov/pub/irs-pdf/p523.pdf#page=4

Health-related move. You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold:

You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member.
You moved to obtain or provide medical or personal care for a family member suffering from a disease, illness, or injury.
Family includes:
1. Parent, grandparent, stepmother, stepfather;
2. Child, grandchild, stepchild, adopted child, eligible foster child;
3. Brother, sister, stepbrother, stepsister, half-brother, half-sister;
4. Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law;
5. Uncle, aunt, nephew, niece, or cousin.
A doctor recommended a change in residence for you because you were experiencing a health problem.
The above is true of your spouse, a co-owner of the home, or anyone else for whom the home was their residence.