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Owned home since 1991 / went overseas in 2001 to work for a…

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Owned home since 1991...

Owned home since 1991 / went overseas in 2001 to work for a defense contractor ( I am not military ), came back 3-4 times a year for only around 2 weeks each time, and finally came home this month. The home was never rented during the absence. Friends looked after it for me. I'm thinking it does not qualify as "primary residence" since I have worked overseas for so long, even though I owned it for 26 years

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

My spouse has lived in it for 3.5 years , but we do not file jointly

Submitted: 5 months ago.Category: Tax
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12/18/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,229
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. My name's Lane.

...

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986

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I have a couple of questions. If your wife is on the title, SHE will still get a $250,000 exclusion of gain. Who is on the title right now?

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Also, if the taxpayer cannot satisfy the use and ownership tests to claim the full exclusion amount, then a partial exclusion equal to the amount of time that the taxpayer does satisfy the use and ownership test divided by 2 years can be claimed if the reason for the sale is because a change of employment.

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So if you sell your house at a gain of $140,000 because of a change in job location, but only lived in the house for 1 year as a principal residence, then you can claim 50% of the exclusion amount, or $125,000. Hence $125,000 would be tax-free but the remaining $15,000 gain would be taxable.

...

So, again, who's on the title, and is it possible you'll live in the home for a while before selling?

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Customer reply replied 5 months ago
I bought the house in 1991, and have held it since. The title has myself and my male spouse on it. He has lived in the house since mid 2014, but we do not file jointly. We are thinking of this as the husband has breathing issues, and we really need a bungalow vs the 2 storey house & basement. I paid $65000.00 for the house and potential sale is $ 520000.00 Thanks
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

OK, first, married taxpayers filing separately, qualify for the $250,000 exclusion.

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So if you are both on the deed, then you'll each report 1/2 of the gain on your respective returns.

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HE would get to exclude 250,000 or HIS respective gain becasue he meets the two of 5 test.

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Then depending on how long you live there before you sell, you, f you moved back for work reasons, would get the pro-rated exclusion mentioned above on for the portion of gain that would be reported on YOUR return.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

OK, first, married taxpayers filing separately, qualify for the $250,000 exclusion.

...

So if you are both on the deed, then you'll each report 1/2 of the gain on your respective returns.

...

HE would get to exclude 250,000 of HIS respective gain becasue he meets the two of 5 test.

...

Then depending on how long you live there before you sell, you, f you moved back for work reasons, would get the pro-rated exclusion mentioned above on for the portion of gain that would be reported on YOUR return.

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Customer reply replied 5 months ago
He came back from overseas as the job ended ( after 16.5 years away ), and it's retirement time for him. I've been retired since 1998. He hasn't really been around much since 2001, except for trips back from holidays. I came back the end of 2012, as we thought work was ending, but the military contracts keep coming, so ... work !
Customer reply replied 5 months ago
I have never worked overseas, just did volunteer things for 9 years at the USO in South Korea ( where he worked from 2001 to 2015 ). As I said he worked for a military contractor, on the military base, and had a cac card for entrance.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

Ok, I may have the two of you reversed in my explanation, but bot***** *****ne, the person that''s lived there for two years can exclude up to 250,000 of gain.

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Then for the the person that hasn't the clock for the pro-rated/partial Exclusion (because it was work ending that caused the move back) starts when returning to US

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Customer reply replied 5 months ago
Thanks
Customer reply replied 5 months ago
we are just too weird a situation for most people to get. I think I will just have to deal with the stairs situation :-)
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

OK... just let me be sure I'm being clear...

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(1) If you are both on the deed, then you will each have to report 1/2 of the gain (Capital Gain = sales price - (purchase price + improvements). So, essentially what you sell it for MINUS what you have in it.

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But again, you each report 1/2 of that on your respective returns because you are each 1/2 owners of the property being sold.

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THe person that's lived there for two years or more gets a $250,000 exclusion. So say that the house was purchased for 250,000 and sold for 500,000. That's a 250,000 gain BUT 1/2 of that is 75000 ... so the person that's lived there for two years gets to exclude EVERYTHING on their separately filed return (their portion of the gain is WELL below the 250,000 exclusion).

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Now, lets say that the person just returning ends up being there for 1 year before the house closes. They will get 1/2 of the 250,000 exclusion (75,000) becasue they only lived there for 1 out of the two years ... but because the move away and then eventually back, was for work they get to exclude the amount of time (as a proportion of the two year retirement)that they DID live in the home before closing ... so coincidentally the 75000 portion of the gain that's the returning person's is exactly how much they'd get to exclude anyway (1 year being 1/2 of two years)

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So in THIS example, you both get to exclude ALL of the gain

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 5 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" (you may have to scroll up to see them OR look to one side or the other if you’re on a device, such as a phone or tablet – That’s the only way I’ll be credited for the work.

I hope you’ll rate me based on my accuracy and thoroughness (as opposed to any good news/bad news content). Thank you!

..

But again, if you need more on this, please let me know.

Lane

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