Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

I helped a friend file s tax return last year. He had been…

Customer Question
I helped a friend file...
I helped a friend file his tax return last year. He had been renting his prior residence to someone he had a verbal agreement with to sell at some point in time. Now I am aware his intent was to pocket the rent until they decided to sell/buy the property. I was unaware of this and recorded the rent and made it income property. He sold the property after 27 months of renting to him. Since I made it income property is there any way to reverse to avoid the gain on sale?
Submitted: 2 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 35 minutes by:
1/27/2016
Tax Professional: Christopher B, Esq., Tax Attorney replied 2 years ago
Christopher B, Esq.
Christopher B, Esq., Tax Attorney
Category: Tax
Satisfied Customers: 4,174
Experience: associate attorney
Verified

My name is***** and I will be helping you with your question today. This is for informational purposes only and does not establish an attorney client relationship.

Basically if your friend lived in this home 2 out of the past 5 years, he still might qualify. There is also a main home test (the home where he spent the most time). See below for the IRS requirements.

From the IRS website: https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink10008937

You can exclude up to $250,000 of gain ($500,000 if married filing jointly) on the sale of your home if you meet the Eligibility test.

Eligibility Step 1—Automatic Disqualification

Determine whether any of the automatic disqualifications apply. Your home sale is not eligible for the exclusion if ANY of the following are true:

  • You acquired the property through a like-kind exchange (1031 exchange), during the past 5 years. See Pub. 544, Sales and Other Dispositions of Assets.

  • You are subject to expatriate tax. For more information about expatriate tax, see chapter 4 of Pub. 519, U.S. Tax Guide for Aliens.

If any of these are true, skip to Figuring Gain or Loss , later.

Eligibility Step 2—Ownership

Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.

If you received Form 1099-S, Proceeds From Real Estate Transactions, the date of sale appears in box 1 of Form 1099-S.

If you did not receive Form 1099-S, the date of sale is either the date the title transferred or the date the economic burdens and benefits of ownership shifted to the buyer, whichever date is earlier. (In most cases, these dates are the same.)

Eligibility Step 3—Residence

Determine whether you meet the residence requirement. If your home was your residence for at least 24 of the months you owned the home during the 5 years leading up to the date of sale, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period.

If you were ever away from home, you need to determine whether that counts as time living at home or not. A vacation or other short absence counts as time you lived at home (even if you rented out your home while you were gone).

If you have a disability, and are physically or mentally unable to care for yourself, you only need to show that your home was your residence for at least 12 months out of the 5 years leading up to the date of sale. In addition, any time you spend living in a care facility (such as a nursing home) counts toward your residence requirement, so long as the facility has a license from a state or other political entity to care for people with your condition.

Please let me know if you have any further questions and please positively rate my answer as it is the only way I will be compensated for my time by the site.

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Christopher B, Esq. Your Own Question
Christopher B, Esq.
Christopher B, Esq.
Christopher B, Esq., Tax Attorney
Category: Tax
Satisfied Customers: 4,174
4,174 Satisfied Customers
Experience: associate attorney

Christopher B, Esq. is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Lev, I am preparing a business tax return for a client that
Good afternoon Lev, I am preparing a business tax return for a client that leased expensive equipment to buy and he put down large down payment and few monthly lease payment. He has the option to exer… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
My wife and I have decided to downsize from our larger home
My wife and I have decided to downsize from our larger home to a midsize condo in Florida. However we cant get the condo until we sell our house- which may take 6 months. We have picked a nice condo, … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
My wife owned a home that we sold this year. My question
My wife owned a home that we sold this year. My question relates to deductibility. Wife moved out of the house in late 2006 and into our current home. It was jointly held (right of survivorship) with … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
My husband and I built our home in 1985. We moved to the
My husband and I built our home in 1985. We moved to the coast in 2008 but he passed away in 2013. My son has remained in the house to keep it maintained and he has paid my property taxes. Since my hu… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
4 years ago a close friend bought a duplex in Culver City,
Hello 4 years ago a close friend bought a duplex in Culver City, CA for my Husband and I. We could not purchase the property at the time. We made an agreement that when we were ready we could purchase… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,512 satisfied customers
I have a tax question about when and how to deduct a business
I have a tax question about when and how to deduct a business loss. I was working with someone who provided financing to create a financial product, I did all the work. The financier ultimately left t… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
. My girlfriend and I are looking to buy a house together.
Hi. My girlfriend and I are looking to buy a house together. The loan will be in my name and she will be paying half of it, technically as "rent." She will in turn be renting out her own house. As for… read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
3/14/14 I have a friend who lived in Switzerland for 21
3/14/14 I have a friend who lived in Switzerland for 21 years ... my friend is an American citizen... but worked for a Co. from '97, '98, '99 & '00.... my friend was 'unaware' that he had to pay taxes… read more
abci168
abci168
Principal
27 satisfied customers
Im considering creating an LLC to invest in real estate with
I'm considering creating an LLC to invest in real estate with a friend. We will buy and sell houses. What's the best way to optimize for taxes - specifically, how can I make sure that profits are trea… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,512 satisfied customers
Im planning to buy a house for my brother to live in while
I'm planning to buy a house for my brother to live in while attending school. Will that qualify as my second home, or investment property? My intent is to help my brother out instead of me giving the … read more
WebCPA
WebCPA
Manager
Bachelor's Degree
62 satisfied customers
What are the IRS rules if my son wants to establish residency
What are the IRS rules if my son wants to establish residency again in Texas? He is purchasing a house here soon. He now rents in Los Angeles and his company is based in La Jolla. He travels all over … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
My husband and a friend of his who is a real estate agent purchased
My husband and a friend of his who is a real estate agent purchased a 'fixer' house that was in foreclosre in late 2007. They split the costs exactly 50/50 of purchasing the house, financing it short-… read more
socrateaser
socrateaser
1,031 satisfied customers
I gave an accountant some rough numbers on 3 years of back
I gave an accountant some rough numbers on 3 years of back taxes for him to find out from the IRS what would have to paid and what the time payments might be per month. When he called the IRS he gave … read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
08/05 Daughter & son-in-law refid and rented out their home.
08/05 Daughter & son-in-law refi'd and rented out their home. Son-in-law was in Florida for an extended period of time for work. Transactions were done by fax and email. I also refi'd and rented out m… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Renting a house in Sarasota, included in the rent property ...
Renting a house in Sarasota, included in the rent: property taxes, interest and homeowners. In other words, I pay the whole monthly of an even $2,100. Good friends of mine who live in Maryland funance… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am told that I am being given a gift of $400,000 from the ...
In 1985 I wanted to purchase a condo property around the corner from my home. I was 29 at the time and my income was much less than my fathers' so I offered him the following proposal: He put down the… read more
MequonCPA
MequonCPA
CPA Firm Owner
Master's Degree
2,165 satisfied customers
Does one owes gift tax by sending other $380K after tax shared investm
I loaned $200K to my friend for him to invest in oil exploration as a share-holder two years ago. The verbal agreement was to share the profit proportionally when he sells all his shares. This year. h… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
my husband did not file taxes for the year 2002..he has ...
my husband did not file taxes for the year 2002..he has some farmland that he really needs to sell, because of financial difficulties..but his sister and brother tell him if he sells it, the irs will … read more
Christopher Phelps
Christopher Phelps
Sole Practitioner
Master Degree
1,180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x