2ND HOME CAPITOL GAINS

[sillysyl]

Potential client would like me to revisit their 2023 tax return, regarding sell of second home.

They sold their primary home back in 2018. moved to San Diego to live in her parents condo.  They have a home in Big Bear CA. They use the Big Bear home as their primary home, but their mail goes to a P.O. box and their tax return has her mother's address. They did not establish the Big Bear home as primary on paper.

I have read about the "look Back" requirement and also Health-Related Move. The Husband has had medical issues since 2017 which have gotten progressively worse and in 2017 they placed the mother in a memory facility.

Is there any  chance I can use any of these two to recalculate the capitol gains on the big Bear home. Big bear Home sold May 2023.

Thanking you all in advance.

Sylvia

TaxWiz

[Terry53029]

Do they meet the requirements to take a section 121 exclusion on the big bear home? In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Here is a link for all rules.

https://www.irs.gov/publications/p523

[sjrcpa]

"moved to San Diego to live in her parents condo. "

"They use the Big Bear home as their primary home,"

These 2 statements contradict each other.

[sillysyl]

THANKS

[qbteachmt]

Was the PO Box a Big Bear box, or their old town, or San Diego?

Did they use the Big Bear house seasonally, occasionally, or for a time and then realized they needed to be closer to the San Diego situation?

They lived in the condo which wasn't theirs while they owned a home, but that doesn't make the Big Bear home their primary residence. It makes it the only personally-owned residence. Was it empty when they weren't staying there, or was it in a rental pool?

What you need to determine is, if there is some/enough of the most recent 5 years of ownership where you can show it was lived in as the primary residence, even if that was broken up into segments:

"The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion."

For instance, they were in Big Bear most weekends, all summer when the kids were out of school, for Thanksgiving and Christmas and Spring breaks, on occasion they went to San Diego for a night or couple of nights at a time, to deal with the health care issues, but otherwise, went "home" to Big Bear, until deciding the commute to San Diego didn't make sense. And all of this is documented, of course: a personal calendar, some emails and texts and correspondence that reflects their schedule to check in with the parent, the care givers, the facility, etc.