Tax Guru – Ker$tetter Letter

From a Reader:

Subject: Multiple residence sales

Dear Mr. Kerstetter,

On your blog page someone asked about selling multiple homes in less than 2 years.

You told him he could not exclude all the sales and should see about amending past filings to decide which one he would be better off having taxed and which excluded.

This is missing something though.

You referenced him to From IRS Pub 523.

If you look closely, he could qualify for a partial exclusion.  He didn’t say the reasons for selling or his profits, but if he sold for one of a few certain specified reasons, he might be able to exclude a portion of the allowed limit.

You said it’s part of the tax code that is not a gray area.

That doesn’t mean it’s free from exceptions.

I’m only aware of this because I’m in a similar circumstance, trying to time a move such that I can avoid the tax hit on the house since I sold my last house less than a year ago.

My Reply:

You are correct that some people may qualify for a pro-rated tax free exclusion for more than one home sale within two years, if it was caused by unforeseen circumstances.  I have covered dozens of such examples in postings over the past few years.

I didn’t mention it with this person because he didn’t claim to have any such special circumstances and was actually claiming to never have known about the two year rule at all.  I posted it as an example of how slowly details of tax laws spread, even after being around for almost nine years.

Thanks for writing.

Kerry Kerstetter