Suppose a rental property becomes a principal residence, and is sold more than 5 years later.
IRC § 121(b)(5) seems to say that a portion of the gain must be allocated to the period of non-qualified use.
But in 2018 Publication 523, Worksheet 3 (p. 15), Section B says:
"Section B. Determine your non-qualified use gain. Complete this section only if there is a period, after the year 2008, when neither you nor your spouse (or your former spouse) used the property as a main home, and that period of non-use occurred during the 5-year period prior to the date of sale and before the time when you or your spouse (or your former spouse) used the property as a main home. Otherwise, skip to Section C."
Under this instruction, Section B is skipped, as the period of non-qualified use does not overlap the 5-year period. Skipping Section B makes all of the gain eligible for exclusion.
Is this an error in Publication 523? It seems like a botched expression of the exception in § 121(b)(5)(C)(ii)(I).
- posted 8 months ago