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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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Montana law or national law on capital gains my parents own

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Montana law or national law on capital gains my parents own a home and need to go to assisted living because of medical reasons. When does their house need to be sold so they do not have to pay capital gain tax ?

Robin D :

Hello and thank you for using Just Answer,

Robin D :

In general, you are eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its sale. Generally, you are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

Robin D :

There is an exception to the use test if:





  • You become physically or mentally unable to care for yourself, and




  • You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home.





Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition.


 


If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion.

Robin D :

In short as long as the person still owns the home they can use the exclusion when they sale if they had to stay in assisted living because they could not care for themselves.

Robin D :

The exclusion is up to $250,000 of gain for single taxpayers and $500,000 of gain for married filing joint taxpayers.

Robin D :

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Customer:

Thank you for the laws. Now please interpret them for me. My folks owned their home for 30 years. In August of 2009 they moved into assisted living as my dad was not able to care for himself. The house has remained vacant since August of 2009. At this point they have not lived in their house for over three years. Would capital gains taxes be due now if the house is sold? If they are not due now, at what date will they be due?

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15014
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 3 other Tax Specialists are ready to help you
Hi, another expert here.
Moving to assisted living facility is qualified exception. They are still considered living there unless they tried to rent it out or turn it into income producing business.

From IRS publication 523:
Exception for individuals with a disability. There is an exception to the use test if:
  • You become physically or mentally unable to care for yourself, and

  • You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home.

Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion.

If the property is sold for less then $500.000 there will not be any tax consequences. They will have to file Married filing jointly and include the sale on the tax return but they will be able to claim the exception as long as they sell the house before August 2013.
emc011075, Tax adviser
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Would capital gains taxes be due now if the house is sold? If they are not due now, at what date will they be due?


In short, as the tax law stands now, they will not have capital gains tax as long as they do not sale the house and get more than $500,000 over what they paid for it. They have no date as of now that they have to sale it by because they still own it and it doesn't matter that they live in assisted living because they are still considered to be living in their own home.

I sincerely XXXXX XXXXX covers your concerns for them.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15014
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 3 other Tax Specialists are ready to help you