Question

Arnold, who is single, sold his principal residence on April 10, 2018, and excluded the realized gain under § 121 (exclusion on the sale of a principal residence). On April 12, 2018, he purchased another principal residence, which he sells on January 12, 2019, for a realized gain of $80,000. Based on each selling reason listed below, indicate if Arnold can exclude the January 2019 $80,000 realized gain by selecting "No, may not exclude" or "Yes, can exclude" and enter the amount of recognized gain for each. If an amount is zero, enter "0". Do not round intermediate calculations.

a. His noisy neighbors? No, may not exclude $-_______ Amount of
recognized gain____________$

b. A job transfer to another city? Yes, can exclude $______________ Amount of
recognized gain___________ $

Answer 1

For exclusion of gain on principal residence, there should be 3 condition should be satisfied for exclusion before 24 months

Job transfer, health issue and other unforeseen circumstances and exclusion will be allowed partially for use of months

Formula = Maximum exclusion in unforeseen circumstances = Full exclusion × Qualifying months/24 months, where 250000 is limit for single

a.      His noisy neighbors? No, may not exclude $0 Amount of recognized gain $80,000, since this is not the reason as specified.

b.     A job transfer to another city? Yes, can exclude $80,000 Amount of recognized gain 0$

250000 x 9 months/24 months = 93750, since excluded gain is more than 80000, all of $80000 is excluded