Final answer:
Alex would need to pay taxes on a $10,000 gain from selling his home if he owned it for less than 2 years and does not meet the primary residence criteria for capital gains tax exclusion.
Step-by-step explanation:
Alex would have to pay taxes on the $10,000 gain from selling his home in the following situation:
- If Alex has owned the home for less than 2 years, he might not qualify for the full capital gains tax exclusion offered to homeowners who have used the home as their primary residence for at least two out of the five years preceding the sale.
In contrast, if Alex has owned and lived in the home as his primary residence for more than 2 years, he likely qualifies for the exclusion, which means he would not have to pay taxes on the gain (up to $250,000 for individuals and $500,000 for married couples filing jointly). Selling the home at a loss or using the money from the sale to buy a new home does not typically result in a tax liability on the gain because there would be no gain in the case of a loss, and the tax code no longer provides the rollover provision for gains used to purchase another home.