Capital Gains tax on second home

[camster39]

What is the name of your state (only U.S. law)? NJ

I am the seller on a property with a tentative closing date of July 1, 2010.

I occupied this particular property as my primary residence from January 2004 thru January 2006. In other words, I have occupied this property for 6 months within the past 5 years. For the past few years, my parents have occupied this property and I have resided elsewhere.

My understanding is that in order to qualify for the $250k exemption (for single), one needs to occupy a property as primary residence for 2 out of the past 5 years; however, I came across a 'partial exclusion' article with an excert below.

'You can exclude a portion of your gain if you are selling your home and lived there less than 2 years and you meet one of the three exceptions. You calculate your partial exclusion based on the amount of time you actually lived in your home.
Count the number of months you actually lived in your home. Then divide that number by 24. Then multiply this ratio by $250,000 (if unmarried) or by $500,000 (if married). The result is the amount of gain you can exclude from your taxable income."

Using this formula, does that mean that I am eligible for an exlusion of $62,500 (6/24 * 250,000)?

Thank you.

 

[FlyingRon]

The calculation is right, but in order for you to use that partial exclusion you have to meet one of the requirements for using the exception to the 24/60 rule?

 

[LdiJ]

What is the name of your state (only U.S. law)? NJ

I am the seller on a property with a tentative closing date of July 1, 2010.

I occupied this particular property as my primary residence from January 2004 thru January 2006. In other words, I have occupied this property for 6 months within the past 5 years. For the past few years, my parents have occupied this property and I have resided elsewhere.

My understanding is that in order to qualify for the $250k exemption (for single), one needs to occupy a property as primary residence for 2 out of the past 5 years; however, I came across a 'partial exclusion' article with an excert below.

'You can exclude a portion of your gain if you are selling your home and lived there less than 2 years and you meet one of the three exceptions. You calculate your partial exclusion based on the amount of time you actually lived in your home.
Count the number of months you actually lived in your home. Then divide that number by 24. Then multiply this ratio by $250,000 (if unmarried) or by $500,000 (if married). The result is the amount of gain you can exclude from your taxable income."

Using this formula, does that mean that I am eligible for an exlusion of $62,500 (6/24 * 250,000)?

Thank you.

No, that provision of the law is for people who have not owned the home for a full two years yet, but it was their primary residence the entire time. Its for people with unexpected life circumstances that end up having to sell their home before they have lived and owned it for 2 years.