Question

Danielle, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2019, enters into a contract to sell on July 12, 2019, and sells (i.e., the closing date) the residence on August 1, 2019. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Danielle as the principal residence for at least two years during the prior five-year period?

Answer 1

The closing date (August 1, 2019) is considered the appropriate ending date in order to determine if the residence had been owned and used by Danielle as her principal residence for at least two out of the five previous years.

If Danielle met the requirements to use the § 121 deductions, she will not have to pay any taxes for the gains generated by the sale of her principal residence. § 121 allows single filers to deduct up to $250,000 of their gains and $500,000 for joint filers.