Question

Margie, a single taxpayer, owned and used her home as a principal residence for 18 months. She then sold her home because of a new job in another city, realizing a gain on the sale of $300,000. What would Margie’s reportable gain be?

Answer 1

A taxpayer's personal residenceis a personal use asset.  A realized gain from the sale of a personal residence is subject to taxation. However, favorable relief from recognition of gain is provided in the form of the 121 exclusion. Under this provision, a taxpayer can exclude upto $ 250,000 of realized gains on sale.

The requirements for exclusion are :

• The house must be owned and used as the principal residence for two years.

There are exceptions to the two year rule ownership rule : -

• Change in the place of employment.
• Health
• Other unforeseen circumstances.

Change in the place of emploment :- The location of the tax payer's new employment must be atleast 50 miles further from the old residence than the old residence from the old job.

Thus does not appear to satisy any of the exclusion requirement. Thus Margie's reportable gain would be $ 300,000.