Question

Which of the following statements regarding a taxpayer's principal residence is true for purposes of determining whether the taxpayer is eligible to exclude gain realized on the sale of the residence?

A. A taxpayer may have more than one principal residence at any one time.
B. A taxpayer's principal residence may not be a houseboat.
C. A taxpayer with more than one residence may annually elect which residence is considered to be the principal residence.
D. None of these statements is true.

Answer 1

The correct statement regarding a taxpayer's principal residence for determining eligibility to exclude gain realized on the sale of the residence is that none of the given statements is true.

Step-by-step explanation:

The correct statement regarding a taxpayer's principal residence for determining eligibility to exclude gain realized on the sale of the residence is Option D: None of these statements is true.

According to the IRS, to be eligible to exclude gain, the taxpayer must have owned and used the property as their principal residence for at least two out of the five years before the sale.

So, a taxpayer cannot have more than one principal residence at any one time (Option A), a principal residence can be a houseboat (Option B), and a taxpayer with more than one residence cannot annually elect which one is considered the principal residence (Option C).