Question 1

A single taxpayer sells their principal residence for a $400,000 gain. They lived in the home for 18 months due to a job transfer (a qualified unforeseen circumstance). The maximum exclusion is normally $250,000. What is the exclusion amount allowed?

Accepted Answer

Reduced Exclusion Calculation: (Months Qualified / 24 Months) * Max Exclusion. 18/24 = 0.75. 0.75 * $250,000 = $187,500.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Thinking no exclusion is allowed because the 2-year test wasn't met.

A single taxpayer sells their principal residence for a $400,000 gain. They lived in the home for 18 months due to a job transfer (a qualified unforeseen circumstance). The maximum exclusion is normally $250,000. What is the exclusion amount allowed?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA TCP Practice Exam 3

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