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Sale of Personal Residence Sold as Two Separate Units


taxn00b
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Taxpayers (MFJ) owned two side by side duplexes.  While residing there, they knocked down the dividing wall and used both duplexes as a single unit for their primary residence (one address).  When they sold the property, they reconstructed the dividing wall and sold each side as a separate unit, each reported as an independent sale (two settlement sheets and two 1099-S).  Would they be able to claim the 121 exclusion on both sales?  TIA

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2 hours ago, taxn00b said:

Taxpayers (MFJ) owned two side by side duplexes.  While residing there, they knocked down the dividing wall and used both duplexes as a single unit for their primary residence (one address).  When they sold the property, they reconstructed the dividing wall and sold each side as a separate unit, each reported as an independent sale (two settlement sheets and two 1099-S).  Would they be able to claim the 121 exclusion on both sales?  TIA

I don't see why not if they pass the residency tests and never used it as a rental.

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22 hours ago, taxn00b said:

Would they be able to claim the 121 exclusion on both sales?  TIA

Interesting question for a tax lawyer.  If you think they qualify, would they be able to take the entire $500K exclusion on each sale? Or should they get only a combined $500K exclusion on the two sales?

Both may run into the problem that the exclusion is not allowed for any sale if the exclusion was taken on a sale within the previous two years.  Of course, they could have made a single sale to a third party, who then sold the two units separately.  Since they didn't, I don't know the answer.

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If it was one residence for the MFJ couple selling, and they otherwise qualify, then up to $500,000 exclusion. It was one residence for the couple, per OP; they just sold it in two pieces. A bit like selling some land used with a residence and then later house and rest of the land as two sales that can qualify for the exclusion if meeting all the qualifications and time limits. Never a rental, right?

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