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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29919
Experience:  Taxes, Immigration, Labor Relations
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I live in CA.In 2010, I bought two properties, about 50

Customer Question

Hi . I live in CA.In 2010, I bought two properties, about 50 miles one from other .I lived in one for three years and also sometime I rent a room (rent tax was paid).Finally I sold it in 2015. The second one I did used as secondary home (almost every weekend I was here by the time when I lived in the first one ,sometime all week) .I also rented room and paid rent taxes from this property. In january 1 2014 I moved in to the second property .Is already two years when I live here . Now Im thinking to sale this property (second one ).
Can I sale it and get (another) 250K free from tax,or ILL get only tax free for two years and the past three years (2011-2013) will be no counted as personal use ?
Sincerely ***** *****
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

If you sold the property in 2015 and excluded the gain as that was your primary residence (within the meaning of section 121) - you may NOT claim another similar exclusion for any sale within two years starting the date of your original sale.

Here is an actual statute

(b) Limitations

(3) Application to only 1 sale or exchange every 2 years

Subsection (a) shall not apply to any sale or exchange by the taxpayer if, during the 2-year period ending on the date of such sale or exchange, there was any other sale or exchange by the taxpayer to which subsection (a) applied.

Sorry if you expected differently.

You will be allowed to exclude the gain if the property will be sold in 2017.

Customer: replied 1 year ago.
Thanks ,however I'LL have more question .
Do the 24 months need to be between sales date or tax year 2015,,2017 ?
Is ok to use code 121 for the first property which I bought 2010 and sold 2015 ? )
Will be right I sale in 2017 and use 121 in 2018 for the second property ?
Will be counted five years for the second property even by first three years (2011-2013)was used as second home ?
Expert:  Lev replied 1 year ago.

You have correct understanding - that period must be between dates of the sale.

Just an illustration example

If you sold your primary residence on March 25, 2015.

Then you may sell your another primary residence and use section 121 exclusion anytime after March 25. 2017.

Assuming you will sell your another primary residence on April 1, 2017 - we would need to verify that there were NO other section 121 exclusions during 24 months before that date - means between April 1, 2015 and April 1, 2017.

That means - you may potentially use the exclusion on your 2017 tax return which you will file by Apr 15, 2018.

Expert:  Lev replied 1 year ago.

Regarding two-out-of-last five qualification - you may use ANY years during last five years before teh sale date.

But you may not use same months when teh property was not your primary residence.

Another issue is related to rental - that mans a part of gain will be apportioned to depreciation - and that part may not be excluded.

So - these all are separate issues.


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