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Stephen G.
Stephen G. , Sr Financial Expert
Category: Finance
Satisfied Customers: 5999
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I bought my home in March, 2012. I have lived in it since then

Resolved Question:

I bought my home in March, 2012. I have lived in it since then as my primary residence. If I sell it before March, 2014 will I have to pay PRO-RATED capital gains to the Fed and to the state of CA or will I only have to pay capital gains on the full amount of my gain (ie: no pro-ration)?
Submitted: 2 years ago.
Category: Finance
Expert:  Stephen G. replied 2 years ago.

Stephen G. :

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

Stephen G. :

What is the reason that you would sell the home before March, 2014?

Stephen G. :

There are some exceptions to the 2-year rule which allow pro-ration of the exclusion.

Customer:

please hold

Stephen G. :

Are you sure you would have a gain if you sell your home, after closing expenses deed stamps, real estate commission, etc?

Customer:

My non-registered domestic partner (she owns 50% of the house with me) has been out of work for some time and we were thinking of moving to Texas because housing is cheaper and there is more jobs out there. I would continue to work my (self employment) job out there.

Customer:

Yes, we would have a sizeable profit.

Stephen G. :

Well, making a change because of employment is one of the exceptions that would allow pro-ration.

Stephen G. :

Well you say unregistered you mean you aren't married, is that correct?

Stephen G. :

Of course March is only 5 months away at this point.

Stephen G. :

Questions?

Customer:

We aren't married - correct. She does not have a job out there - she would get one when we get there. And only she could take the pro-ration at best by the sounds of it?

Stephen G. :

Well, I'm not so sure I'd reach that conclusion so quickly. What business/service are you engaged in as a self-employed individual?

Customer:

I work for a real estate agent. I book appointments for him to meet with clients.

Stephen G. :

Would you continue to do that for the same agent in California while you are in Texas?

Stephen G. :

Another thing.............the inability to continue to meet your living expenses due to a loss of income is given as an example of an "Unforeseen Circumstance" that would qualify to allow a pro-ration of the exclusion.

Customer:

yes

Customer:

OK. My understanding is that she could take the exclusion, but the fact that I can pay MY 1/2 of the fees means i would not be able to take the exclusion.

Stephen G. :

So, that may be what would qualify both of you to be eligible for the pro-ration.

Customer:

i mean living expenses

Customer:

Hmmm. Sounds like a gray area - and if we lose, it could get VERY expensive. Sounds like it's safest to wait until March.

Stephen G. :

Well, that may not be true as in terms of the mortgage, if she can't pay, you would be responsible and that might not be so easy for you to do.

Customer:

Actually, we can close on March 1st as we bought on march 1, 2012

Customer:

I am earning enough to pay her share of the mortgage.

Customer:

Sounds risky to me!

Stephen G. :

Even though you have an arrangement with your partner to pay 1/2, that doesn't matter if there's a problem; mortgage, utilities, & all the rest.

Customer:

OK. Thanks for the information.

Stephen G. :

Well, clearly the best and easiest solution is not to close until March 1st 2014; that could be a condition of any sale:

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