Updated about 1 hour ago on .
Most recent reply
presented by
121 Excl US Ion: Main Home To Llc Rental
Does couple qualify for capital gains exemption?
Clients (married couple) purchased and lived in main home/residence from 2019 through mid 2022. Mid 2022 placed as a rental property under LLC (treated as an S-Corp/1065). Now they want to sell and would like to benefit from the 121 exclusion capital gains. They are inquiring about transferring the deed back to their names, before selling the property. I've read through the IRS publication 523.
Do they even qualify?
Most Popular Reply
- Accountant
- Los Angeles, CA
- 808
- Votes |
- 1,816
- Posts
They can only claim the §121 exclusion if the property is titled in their personal names or a disregarded single-member LLC, not an S-Corp or multi-member LLC. They must have lived there for at least two of the past five years to qualify, and any depreciation claimed during the rental period is taxed separately at up to 25%. If the property was transferred from an entity they control, that can trigger related-party issues
- Jason Malabute
