Home Sale Exclusion

Home Sale Exclusion:

You can exclude from gross
income up to $250,000 ($500,000 joint) of gain from the sale of your principal
residence. The exclusion can be claimed once every 2 years. An exception is
provided if you do not meet the ownership and use tests, or the limit of one
sale in two years as a result of a change in place of employment, health, or
unforeseen circumstances. IRC Sec. 121(c).   Unforeseen circumstances include: involuntary
conversion (e.g., fire), death, or divorce. Reg. Sec. 1.121-3(e), and other situations
deemed appropriate. The following factors will be considered in determining if
another circumstance qualifies: The sale and the circumstances giving rise to
it are close in time; the suitability of the house as your principal residence
materially changes; your financial ability to maintain the property is
materially impaired;  the
circumstances giving rise to the sale were not reasonably foreseeable when you
began using the property as your principal residence; and  the circumstances giving rise to the
sale occur during the period you in fact own and use the property as your
residence. Reg. 1.121-3(b) In a recent ruling the IRS held that the commission
of a violent crime against a homeowner at his home justified a sale and waived
the requirements. PLR 200630004.  A
reduced exclusion applies to gain from the sale of the home. The
$250,000/$500,000 maximum exclusion is multiplied by the shortest of the
following: the period you owned the property during the 5-year period ending on
the date of sale;  the period you
used the property as your principal residence during the 5-year period ending
on the date of sale; or the period between the date of the prior sale or
exchange of property for which you excluded gain under Code Section 121 and the
date of the current sale] divided by 730 days.