Date: 26 Mar 2009
I have two houses I am planning to short sell because my husband lost his job. Both qualify for the exclusion from gain for sale of a principal residence. We have lived in our current home for over two years and we also lived in the previous home for two of the last five years. If I short sell both of them, would they both qualify for the exclusion for cancellation of debt for a principal residence?
Thank you for your time.
Date: 6 Apr 2009
No. Different rules apply for determining whether a residence is a principal residence under the cancellation of debt rules, which is based on whether the residence qualifies as a principal residence for deducting mortgage interest.
You can only have one principal residence at a time under these rules, which would be your current residence.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised
that any written tax advice contained on this website was
not written or intended to be used (and cannot be used) by any
taxpayer for the purpose of avoiding penalties that may be
imposed under the U.S. Internal Revenue Code.