Capital Gains Exclusion on Jointly Owned Home: Clarification Needed

[John Jung]

Hello Bigger Pockets community,

I'm currently in the early stages of purchasing a property with a partner, and I have some questions about the potential tax implications if we decide to sell within five years. Here's the situation:

1. We are planning to buy a home together.
2. I intend to live in the property for one year.
3. My partner plans to continue living in the property for at least two years before considering a sale.

Given this scenario, I'm curious about the tax consequences if we decide to sell the property before the five-year mark. Specifically:

1. How does the ownership and use test for the capital gains exclusion work in our case?

How does the "ownership and use test" work for the capital gains tax benefit in our situation? Can both of us benefit from the tax break, or is it divided based on how long we each live in the house? If we sell within five years, how much of the profit might be taxed?

I want to make sure my partner can get the tax benefit even if I can't. Is it based on the ownership split? For example, if we each own half of the home, can he exclude his 50% share from taxes while I pay taxes on my 50%?

2. Will both of us be eligible for the exclusion, or will it be prorated based on our respective occupancy durations?
3. What portion of the gains might be subject to capital gains tax if we sell within five years?