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Archive for February 21st, 2003

Posted by taxguru on 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 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:

It may seem like being overly picky, but it does make a difference.

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