Tax Guru-Ker$tetter Letter

Friday, February 21, 2003

Tax Free Residence Sales

Even the "experts" get confused on the rules. Gail Buckner had this erroneous explanation on how the pro-rated exclusion works when a home is sold after less than 24 months.

Here is my e-mail to her:

Ms. Buckner:

Your explanation in today's FoxNews.com column on the reduced primary residence exclusion was wrong. The excludable gain itself isn't pro-rated. The maximum exclusion is prorated.

For example, someone who owned & lived in the home for 12 months and was selling for valid unforeseen circumstances would be entitled to half of the maximum excludable gain, which would be $125,000 for a single person or $250,000 for a married couple. If their gain is less than those amounts, their entire gain would be tax free; not just a portion of it as in your example.

I have much more on this rule on my website at:
http://www.taxguru.org/re/primary.htm

It may seem like being overly picky, but it does make a difference.
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/21/2003 10:24:00 PM Send this post: