Legal Question in Tax Law in California

Capital Gains two out of five consecutive???

I am aware that to avoid Capital Gains the property must be your principle residence, and you must have lived in it for 2 of the past 5 years. But does the time you reside at the property need to be continuous?

If I lived in a home for two years, rented it for three, than moved back in while selling it would I be subject to capital gains? Is it legal to move back in to avoid the tax? What would a person need to do to make it their principle residence again? Would a person need to stay there a specified number of times a week?

Thank You

Asked on 9/24/04, 10:22 pm

1 Answer from Attorneys

Ken Koenen Koenen & Tokunaga, P.C.

Re: Capital Gains two out of five consecutive???

You do not need to live in the house when you sell it, as long as it was a primary residence for 2 of the past 5 years.

If it has been a rental for more than 3 years, then you would have to move into the property and re-establish it as a permanent residence. That means you cannot have another residence where your wife lives (if married) and only visit the old house.

This is a great break for homeowners, and the IRS is very strict on the rules.

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Answered on 9/25/04, 2:23 pm

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