Home sale exclusion

[dkh]

Does the following situation qualify taxpayer for Ownership eligibility for the HO exclusion......

Client's son/daughter-in-law rented a house for 1 year then purchased house from landlord.  One year after purchasing they sold the home.   Son/d-in-law's  tax preparer says the year of renting counts towards the required two out of five for ownership.    

My client is concerned because he does not think this correct.   I do not think this correct but I've been known to be wrong on an occasion or two (or three or four........etc etc)    It meets the eligibility test for Residency  not ownership.  Both tests must be met not just one.

Thanks for the help.

[IRonMaN]

For what it's worth, I've been wrong more than that, but I think that tax preparer is full of crap.

[abctax55]

Rent doesn't convey ownership.  So I say nope.

Was there a lease option?  That doesn't transfer title (or ownership) but maybe, just maybe that other preparer is trying to use that as a rationale?   

[dkh]

I don't think so but I'll ask my client. 

[abctax55]

Doesn't matter, IMHO.... it doesn't change the situation.  I was just trying to 'read that preparer's mind' cuz it is Sat. afternoon & I'm bored with the work on my desk 🙂

[IRonMaN]

Oh crap, the other tax preparer could have been taxlady777777777777777777777777777.  I don't want to get in trouble today, so in case it was her, I'll just change my answer to "I don't believe the other tax preparer is correct".  If it wasn't her, then I stand by my original answer. 

[dkh]

lol... I'm avoiding the work on my desk by doing this "research" 

[dkh]

I was really glad I skipped the thumbs up on that post   

[TaxGuyBill]

The definitely don't meet the two-year ownership requirement, but it is possible they moved for a qualifying reason in which case they could qualify for a Reduced Maximum Exclusion.

[garman22]

I also concur.....I say no on ownership.

[taxes96786]

Did you research the instructions in Pub 17 or sale of home? It is clearly stated there.

[abctax55]

Laura, the OP is a pro who has posted here often; he was asking for some back up for his position because another preparer expressed a different one.  The OP stated he disagreed.

Telling him to read the directions/Pub 17 isn't helpful.  It's rude.

[taxes96786]

Not rude...it verifies whether or not he is correct

Just curious...where did you get this: "Tax software is no substitute for a professional tax preparer"

[abctax55]

Busting the ba((s of a level 15 productive member of the forum by telling him to 'check the Pub/read the instructions is rude.  And not helpful at all.

[abctax55]

I'm sure you recognize, and yes, he said I could use it.

And with that, I am done interacting.  

Have a great filing season....

[rcooley25]

As you probly guessed by now I dont care if I get in trouble because of Tax Lady if I believe what I said is correct. So Iron Man his is my sujestion to you. Go to the store and buy a lot of exlax and send it to taxlady.

[taxes96786]

you must own and occupy...everybody happy now?

[dkh]

@TaxGuyBill    Moved to another state to be near a sibling -  was purely by choice

Thanks

[taxes96786]

dkh...read the related info in Pub 523, they may still qualify for a partial exclusion if they can justify the move was necessary.

[dkh]

@taxes96786,     I have 35+ years experience doing taxes.    My question was posted to see if the kinder people on this forum had ever heard of RENT being a qualifier for the ownership test.  I think the preparer that is doing my client's son/daughter-in-laws is full of crap as Ironman stated.   I told my client, whom is concerned his child is getting bad tax service, it is not accurate.   However, the Rent-to-Own lease option that abctax55 asked me about never crossed my mind....maybe that is why the  "full of crap preparer"  is allowing the exclusion.    

By the way, I am a SHE.      You are a Karen in most all of your posts.

Thanks for having my back @abctax55 

[dkh]

@taxes96786   I'M NOT DOING THE TAX RETURN........ I was just looking for clarification on the "RENT" as a qualifier for ownership.    And yes, I read through Pubs before I asked.  

[Skylane]

@dkh   I don't think you'll find your answers in Pub 17.  It's far to basic. 

The dark recesses of section 121(b)(5)(C)(ii)(I) is probably a better cite. I read the article below and agree that rent doesn't qualify as ownership. 

https://www.cpajournal.com/2020/02/05/how-the-loophole-in-irc-section-121-can-benefit-homeowners/#:~....

[dkh]

@Skylane    How did you accept a solution to my post?   

[IRonMaN]

The pub 17 lady just flew in.  I should have known ——- I thought I heard the wings of flying monkeys heading in this direction.

[garman22]

---

@dkh wrote:

@Skylane    How did you accept a solution to my post?   

---

hahahaa!! I wondered same thing. 

[rcooley25]

I could not agree with you more. The recommendation that I made regarding exlax was not aimed at you.

[Skylane]

NDA superpowers…. Helps people from wasting time looking at repetitious posts over & over, & over…. Gives respondents some recognition when the OP doesn’t.

It’s something that WE asked for about 10 years ago and (ultimately) THEY agreed.

Used judiciously, it can be helpful. So, not how but why… Anna was 1000% correct. Bill brought a good point to the table. That’s a big part of what this forum is about.

FWIW, I’d  never mark my own

[IRonMaN]

Which is fine when used where somebody is new and doesn’t know or care about the system.  But you are stealing someone’s thunder when you cut in on a regular and do that.   The flower lady might have wanted to give the pub 17 lady all of the credit for being so helpful. 😜

[dkh]

@Skylane  In the future, I do not need YOU to decide which answer was the resolution to my post.  I didn't need you to do it this time either.  

[rcooley25]

If I am the one that you are refering to in this post I am sorry for  anything that I said.

However dont stop going on line to us when you need help.

[Skylane]

@dkh  Sorry. It wasn’t intended that way. Normally I would not have. Tried sending you a private message but it was disabled.

[dkh]

I'm able to receive and send PM's.

Apology accepted.

[abctax55]

Bruce, maybe "unsolve" me so Denise can mark the one she wants?

Maybe Jeff is right and she'll pick the "read the instructions/Pub 17" one 😉

[Skylane]

Anna, Very limited powers or I would have… what a surprise 

[dkh]

       Yeah, nope, Pub 17 would not be my choice. 

 Bruce chose wisely....was just thrown for a loop that he had the power to do that.

Jeff's "full of crap"  was another good option.

[dkh]

@rcooley25     you are in the clear.  You are not the intended target.

[Skylane]

The PM search engine is apparently broken….. what a surprise