Question 1

A single taxpayer sold their principal residence for a $400,000 gain. They had owned and lived in the home for only 12 months due to a job transfer to a different state (a qualified unforeseen circumstance). What is the maximum exclusion allowed?

Accepted Answer

1. Identify 'Hardship' exception (Job Transfer). 2. Calculate ratio of time met (12 months) to required time (24 months) = 50%. 3. Apply ratio to MAX exclusion ($250k), not the gain. 50% * $250k = $125k.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Prorating the GAIN ($400k) instead of the EXCLUSION LIMIT ($250k).

A single taxpayer sold their principal residence for a $400,000 gain. They had owned and lived in the home for only 12 months due to a job transfer to a different state (a qualified unforeseen circumstance). What is the maximum exclusion allowed?

How to approach this question

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Common mistakes

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