Capital Gains: 2 of 5 Exemption With a Twist

[Thomas Goedecke]

While I am waiting for a response from my accountant, I figured I would try to BP Community. I did try to search, but did not find a similar scenario.

I am considering selling my SFR in North Texas. I lived in it from 2008 to the end of 2020 when I turned it into a rental. Considering I lived in it 3+ years out of the last 5, I would be exempt from capital gains. The catch is that I transferred title via quitclaim to my LLC. Does the title transfer take the 2 out of 5 rule off the table?

[Eddie L.]

@Michael Plaks

Thanks so much. Amazing benefit. Now i have to find any posts where i may have posted the incorrect informarion.

IRC Sec. 121(b)(5)(C)(ii)(I)

https://www.law.cornell.edu/us...

(ii)Exceptions

The term “period of nonqualified use” does not include—

(I)any portion of the 5-year period described in subsection (a) which is after the last date that such property is used as the principal residence of the taxpayer or the taxpayer’s spouse,