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Movin' out for a good tax reason

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in Small Business Tax

Q. We have owned a ranch-style home in a retirement community for more than a year. Now that our adult son is relocating to this area, we may buy another home where he can live upstairs. Can we claim the home-sale exclusion? E.M., Jackson, N.J.

A. Possibly. A married couple can exclude tax on up to $500,000 of home-sale gain only if they’ve owned and used the home two of the previous five years. But the IRS allows a partial exclusion for premature sales due to unforeseen circumstances. Similarly, the IRS approved a partial ruling in the case of a couple that was forced to move out of a community with age requirements after their daughter and her child wanted to move in. (The daughter had just lost her job and was in the process of a divorce.) (IRS LR 200601023) Tip: That must be the primary reason for the home sale.

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