Can a property we've rented out qualify for capital gains exclusion?

August 21, 2008

From:  Frank
Date:  19 Nov 2007

My wife and I purchased a rental property in 1975. We lived in it from 1975 to 1978, and then rented it out to the present.

Do we qualify for the capital gains exclusion if we sell the property in 2008?

Answer

Date:  27 Nov 2007

Hello Frank,

No. The general rule is in order to qualify for the exclusion for the sale of a principal residence, you must have owned and used the property as your principal residence for periods aggregating two years or more during the five years ended on the date of the sale or exchange. Since it’s been nearly 30 years since you used the property as a residence, it doesn’t qualify for the exclusion.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

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.