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I am interested in selling my interest in a jointly owned townhome in Colorado to the co-owner. The co-owner meets the own and use criteria, I only meet the own criteria, having moved to California in July 2006. Also, I moved in July and then found a job. Does my situation qualify for exclusion of the proceeds from the sale of my interest of the property to the co-owner? Please advise. Thank you.
Hello mike, Unless you can meet both the use test and the ownership test, you would not be allowed to claim any exclusion on this sale. You must have actually lived in the townhome as your primary residence for at least 2 of the last 5 years immediately preceeding the sale. So if you would sell your share of this property on 8/15/09, that means that between 8/15/04 and 8/15/09, sometime during that period you had to actually live there for two years. If you moved on July of 2006, you could not possibly meet that qualification. Thank you mike and let me know if you have more questions.
What about the exlusion for employment change?
Hello again mike, That exclusion only applies to people who have owned a home for less than 2 years and then are forced to relocate due to a job change. It does not apply to someone who has already at one point owned the home and lived there for 2 years, and then moves. The reason for this is that once you satisfy the 2 rule residency rule, if for some reason you are forced to move due to a job relocation, the IRS still gives you an additional 3 years to complete that sell without losing your right to claim the exclusion. That is why there is a special allowance granted for people who had to move short of having owned the home 2 years, because they have no chance to qualify. And even then, there exclusion is limited to the actual percentage of time they lived there during the 2 year period. At one point you did qualify to claim this exclusion. And when you moved out in July of 2006, if you had sold the home anytime between then and July of 2009 you would have still been allowed that exclusion. But once that 5 year period has expired, there are no exclusions available. Thank you mike and let me know if you have more questions. I am happy to help you with whatever I can, although there is not much that can be done in your particular situation, other than actually moving back in to the home for another 2 year period of time.
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad