Divorce and Home Sales When Is The Best Time and Capital Gains the Last 5 years

[Jason Meissner]

q1:If a couple could choose to sign divorce papers before or after the sale of the home is there a better choice? 

q2: Is the capital gains rules on living together the last 5 years strict. The state wants a separation as a step to divorce and if a partner lived away from home how does that requirement work? One partner rented a room and lived outside the house beyond this 2 year requirement. Is this couple now exposed to capital gains at the sale?

RULE: 
"The seller must have owned the home and used it as their principal residence for two out of the last five years (up to the date of closing). The two years do not have to be consecutive to qualify. The seller must not have sold a home in the last two years and claimed the capital gains tax exclusion."

Thanks!

[Account Closed]

Section 121 exclusion you are referring to asks: 

Did the taxpayer live in the home for 24 months of the prior 5 years?

If yes then you can take advantage of the capital gains exclusion. Since your partner lived away from the home, they may or may not qualify. 

As for your first question, I'm not sure without getting deeper into your situation