TAXMASTER wrote:So if client used 2nd home as a PR even after first use as a vacation home or rental, then the following 5 years are excluded from being non qualided use
Wrong. Two of those five years must include the period of principal residence, so you have up to three years following the last date of use as PR to get any exclusion.
2. The CPA Journal article points out its really a numbers game. "In certain situations, however, the way that the rules are written permits the maximum exclusion even in cases of nonqualified use. As long as the nonqualified use ratio allocates a sufficiently small amount, the maximum exclusion can still be taken."
but is facing long non qualified use period.
Still nothing in Sec. 121 or the regs. that says periods of ownership only count if they are continuous.
Still nothing in Sec. 121 or the regs. that says periods of ownership only count if they are continuous.
Agreed, at least as to the Code. I don’t think the Regs address non-qualified use at all, but check me on it. The question, though, is whether or not the code actually contemplated some of the examples I presented. The 2 examples in the General Explanation of the Act don’t come close to addressing the situation. One problem with your argument is that you might end up with duplicative periods of NQ use. That is, the same period of non-qualfied use that counts against you in more than one sales transaction.For example, let’s say that a while ago, you owned House1 and had periods of NQ use. You sell House1 and pay tax on the gain associated with periods of NQ use. Years later, you rebuy House1. You use it as your primary residence for 2+ years and then sell it for a $250k gain. Are you telling us that the NQ period associated with your prior ownership of House1 counts against you again with respect to the second sale of House1, such that we actually end up paying some tax on the second sale? Is that your position?
That was msawyer's quote not mine.
I agree if you rebuy House 1 prior NQ use has no bearing.
So back to my original post.
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