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US FEDERAL INCOME TAX. QUESTION: A SINGLE WOMAN OWNS A

HOUSE, HER PRINCIPAL RESIDENCE, AND...
US FEDERAL INCOME TAX. QUESTION: A SINGLE WOMAN OWNS A HOUSE, HER PRINCIPAL RESIDENCE, AND LIVES IN IT FOR 4 YEARS. IN 2017 SHE MARRIES A MAN WHO WILL ALSO USE IT AS HIS PRINCIPAL RESIDENCE BUT NOT HAVE ANY OWNERSHIP INTEREST. TWO YEARS AFTER THEIR MARRIAGE, PLUS ONE DAY, THE WIFE SELLS THE HOME FOR A $700,000 GAIN. THE HUSBAND NEVER HAS AN OWNERSHIP INTEREST AND THE ENTIRE SALES PROCEEDS GO TO THE OWNER WIFE. DOES THIS MARRIED COUPLE, FILING A JOINT RETURN, QUALIFY FOR THE $500,000 GAIN EXCLUSION SUCH THAT ONLY THE EXCESS $200,000 WILL BE TAXABLE IN THEIR JOINT RETURN? AND TAXED AS A LONG-TERM CAPITAL GAIN?
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Answered in 1 minute by:
8/4/2017
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,408
Experience: Certified Public Accountant
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Hi, my name is Mark. I will be happy to help you with your questions. Please give me a moment to prepare your response.

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As long as either spouse meets the ownership requirement then they would be eligible to exclude a gain of up to $500,000. Please see below.

According to IRS Section 121(a)(2)

(2)Special rules for joint returns In the case of a husband and wife who make a joint return for the taxable year of the sale or exchange of the property

(A)$500,000 Limitation for certain joint returns Paragraph (1) shall be applied by substituting “$500,000” for “$250,000” if—

(i)either spouse meets the ownership requirements of subsection (a) with respect to such property;

(ii)both spouses meet the use requirements of subsection (a) with respect to such property; and

(iii)neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3).

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Mark Taylor
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