It's 2 out of the last 5 years ending on the date of sale.

Thank you for the reply! Would you read my detailed question, please? 😀

No, that will take a little research on your part. I was just pointing out the 5 year ownership and use test for the exclusion, based on you stating the 4 year ownership. 4 years does not qualify them for the exclusion

Thank you! The ownership rule is "If you owned the home for at least 24 months out of the last 5". It didn't specify you have to own the home for 5 full years to be eligible for the exemption. 

If it was NOT a main home AFTER a period of not being a main home, yes, it would qualify.

In other words, (1) it they bought it, (2) immediately made it their main home, (3) rented it out AFTER it was a main home and (4) did NOT make it their main home after it was rented, it would qualify.

The exclusion does not cover the depreciation.

Hi Bill,

Thank you for the reply. Why (4) though? My understanding is that the residency test only requires 2 years and it does not have to be in the same time block. If year 1- main home, year 2-3, rental, year 4- main home, it won't qualify? 

Thanks again for your help!

See Section 121(b)(5).

https://www.law.cornell.edu/uscode/text/26/121

As Rick pointed out, that would trigger the "Nonqualified Use" rules, which prorates things.

Do I understand you correctly by saying that if he only rents out PART of his home for 2 years, and he lives there the whole time(4 years) he would qualify for full exclusion without triggering the unqualified use rule? 

Thank you so much!

What is the ACTUAL situation?  You seem to keep adding little bits of information which keep changing things, so give as much detail as possible.

Sorry for the confusion!

Actual situation: 

Ownership: Year 1-4, 4yrs total

Residency: Year 1-4, 4yrs total (temporary absence for 9 months in yr 3 due to change of employment)

Rental(part of home): Year 2-3, 2 yrs total

Your advice is greatly appreciated!

What was reported to the IRS for the years where there was rental income? Was it reported for rental income and some portion of costs taken for the related expense?

You have completely changed the nature of this issue.

Rental income and expenses were correctly reported when he rent out part of his home. It was reported for rental income and some portion of costs taken for the expense.

To make it clear, then: this is the True Facts and Circumstances of the same person and all that prior stuff does not even apply to the topic, and the title isn't applicable, either, because we are starting Over.

Just to be clear, it was ONE home, right?  Not a separate dwelling unit (such as a mother-in-law apartment, with its own entrance and kitchen)?

If it was all one home, it was his home for the entire time, so the exclusion does not need to be prorated.

My question is still the same: is he eligible to claim the full exemption?. Just to make the situation clear:

Ownership: Year 1-4, 4yrs total

Residency: Year 1-4, 4yrs total (temporary absence for 9 months in yr 3 due to change of employment)

Rental(part of home): Year 2-3, 2 yrs total

Rental income and expenses were correctly reported when he rent out part of his home.

I believe Bill just answered. Your advice is greatly appreciated too!

Yes, one home. 

I agree with you! I believe he does pass the ownership and residency test, and since it was his main home for the entire time(even though he rented part of the home for some time), the non-qualified use rule should not apply. 

Thank you! I'm just getting started and I cannot express my gratitude enough for the help from you this community.