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Silver tax lining to wedding bell blues

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in Small Business Tax

Q. My fiancé and I bought a home together a year ago and now we’re splitting up. Can I qualify for any tax-free gain? T.S., Colorado Springs, Colo.

A. Maybe. Generally, the home sale exclusion is available only if you’ve owned and used the home as your principal residence for at least two out of the past five years. However, this requirement isn’t absolute when a home sale is due to certain “unforeseen circumstances.”

IRS regulations refer to the canceling of a wedding as a circumstance that would qualify under this exception. Therefore, you may be entitled to a prorated exclusion that could shelter all or part of the gain from selling your home.

Tip: The maximum home sale gain exclusion is $250,000 for a single filer; $500,000 for a married joint-filing couple.

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