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Burnt On Principle Residence Use Test?

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This question is regarding the $250K exclusion rule for gain on the sale of a principal residence.

 

One of the criteria for determining if a property is a principle residence is the 'use test' of the owner having principly occupied the residence for 730 days out of the last 5 years.

 

If a large casualty such as a fire forces the home owner to rent an apartment in the area, does this period of time that the owner cannot live in the property count for the use test?

What if the property is sold 'as is' without the owner having moved back?

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This question is regarding the $250K exclusion rule for gain on the sale of a principal residence.  One of the criteria for determining if a property is a principle residence is the 'use test' of the owner having principly occupied the residence for 730 days out of the last 5 years.

 

If a large casualty such as a fire forces the home owner to rent an apartment in the area, does this period of time that the owner cannot live in the property count for the use test?

Yes, periods of temporary absence are still counted toward the homeowner's occupancy of his primary residence.

 

What if the property is sold 'as is' without the owner having moved back?
The tax code does provide for a reduced maximum exclusion if certain hardships force the homeowner to sell and move to a new primary residence before satisfying the two year ownership and occupancy tests. The $250K maximum capital gains exclusion (per taxpayer) is prorated for the period of time that the homeowner did actually own and occupy the house as a primary residence.

 

In the event a fire renders the property uninhabitable, I find it difficult to construct a scenario where a "fire sale" property, sold as-is, would still generate a taxable profit.

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