Exemptions on sale of a jointly owned/occupied primary residence

[Karim Hafez]

I have read through read Voss v. CIR, the memorandum for Inspections of Sections 469(g) and 121, scoured the web, and have attempted to find an attorney/CPA with no luck to help me answer a the question stated below:

I am selling a home (currently in escrow) in the Bay Area that I have owned as my primary residence jointly with my parents since 2004 (not purchased in a like-kind 1031 exchange). We all meet the ownership and primary residence eligibility tests. I estimate that our net gain will fall in between $700K-$762K. I am curious if anyone has experienced a sale with gains in excess of $500K with joint owners. 

I am specifically looking to understand if I can take the $250K exemption while my parents take a simultaneous $500K exemption. If you know of a CPA or Attorney in CA that would be helpful in the matter I am more than happy to consult with them.

Section 121 of the IRS code has examples but does not provide examples where the gain is in excess of $500K, so I am trying to get a clear understanding of how to manage the distribution of the gain. Here is a link to the best supporting material I have been able to find.

https://www.thetaxadviser.com/issues/2017/apr/tax-issues-nontraditional-households.html#fn_78

Thank you in advance for any help/insight. 

[Ashish Acharya]

Originally posted by @Karim Hafez:

Hi @Ashish Acharya

First off, Thank You for responding. However, Your response is slightly confusing. The house was paid for by both myself and my parents. We split all expenses including the purchase 33.334% per person. The house IS both my parents and my primary residence. I occupied the property the entire time (starting in 2004) throughout the rehab. My parents moved in and lived with me at the property after the rehab was complete in 2009 and they have lived there since. We all have claimed the property as our primary residence. Please let me know if this changes your perspective.

 Ok, I assumed your parent didn’t live in the house. Sorry that info was not provided before, and I was too quick to jump into my own conclusion. 

If that the case, both you and your parents can take full exemption allowed and together you can shelter 750k in gain. 

Good news right?