Homeowner Exemption for LLC?

I received a question about whether or not property owned by an LLC taxed as a disregarded entity, will qualify for the $250,000 homeowner's exemption.

On the one hand the LLC is disregarded. But under Section 121 the home must be both owned and used by the taxpayer for two years out of five. But if the LLC is the legal title holder, even if it is disregarded for tax purposes, is it disregarded for this purpose?

Thanks for any clarification you can give.

Reply to
Stuart O. Bronstein
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IRC Sec. 121 is controlling. Answer is in the Treasury Regulations. See 26 CFR 1.121-1(c)(3)(ii) and 26 CFR 370-7701(a)

1.121-1(c)(3)(ii)Certain single owner entities. If a residence is owned by an eligible entity (within the meaning of § 301.7701-3(a) of this chapter) that has a single owner and is disregarded for federal tax purposes as an entity separate from its owner under § 301.7701-3 of this chapter, the owner will be treated as owning the residence for purposes of satisfying the 2-year ownership requirement of section 121, and the sale or exchange by the entity will be treated as if made by the owner. § 301.7701-3 Classification of certain business entities. (a)In general. A business entity that is not classified as a corporation under § 301.7701-2(b) (1), (3), (4), (5), (6), (7), or (8) (an eligible entity) can elect its classification for federal tax purposes as provided in this section. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under § 301.7701-2(b)(2)) or a partnership, and an eligible entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner. Paragraph (b) of this section provides a default classification for an eligible entity that does not make an election. Thus, elections are necessary only when an eligible entity chooses to be classified initially as other than the default classification or when an eligible entity chooses to change its classification. An entity whose classification is determined under the default classification retains that classification (regardless of any changes in the members' liability that occurs at any time during the time that the entity's classification is relevant as defined in paragraph (d) of this section) until the entity makes an election to change that classification under paragraph (c)(1) of this section. Paragraph (c) of this section provides rules for making express elections. Paragraph (d) of this section provides special rules for foreign eligible entities. Paragraph (e) of this section provides special rules for classifying entities resulting from partnership terminations and divisions under section 708(b). Paragraph (f) of this section sets forth the effective date of this section and a special rule relating to prior periods.
Reply to
Alan

Thanks Alan. I didn't think to check the regulations. :-O

Reply to
Stuart O. Bronstein

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