Exceptions to the 2-Out-of-5 Year Rule

3 Replies

Hi,

I have a very specific question for you. We have lived in a house for 715 days within the last 5 years, it was our primary residence that we have rented after the number of days above for 2 years, and we are planning to sell it within a 5 years since we bought the property. Is the 2 out of 5 year rule very specific, do we really needed to live in the property for 730 days, and 715 days will be not enough to avaid capital gains tax? If so, can we at least partially avoid capital gains tax, we are talking about around $30k in capital gain tax

Thank you

@Lucas B.   From Publication 523 - 

"Determine whether you meet the residence requirement. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period."

I'd find 15 days in the middle of months you actually resided there when you were at a family member's house for Christmas if I was you.  Sleeping in the house is not the requirement.  

gotcha, so here is the scenario,

Based on what you guys said, I could move in there just for 15 days, to do post tenant repairs and prepare for sell, in order to get my 730 days, right?

Out of curiosity, how are they going to verify that, do I need to prepare some sort of proof I have actually lived there for the 2 years? Does anyone checks that actually, and when?

Thank you for your responses