Is IRC 121 selling your home exclusion also applicable to gain on partial interest sale?

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Is IRC 121 selling your home exclusion also applicable to gain on partial interest sale? TP (MFS) sold 60% of his principal residence. After the sale, TP was still living there. Can TP exclude the gain up to $250,000? Thanks

ProConnect Tax Online

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T

TaxMonkeyAnswer

Level 7

Yes, sale of partial interest can be excluded. See 1.121-4(e).

T

TaxMonkeyAnswer

Level 7

Yes, sale of partial interest can be excluded. See 1.121-4(e).

itonewbie

Level 15

You need to be asking a lot more questions of your clients. In this business, it's never a simple yes or no.

Some of the questions you should raise could include: Was it sold to a third party? Why only partial interest? How's the sale structured? Arm's length transaction? On what terms is your client allowed to stay in the property after the sale?

---------------------------------------------------------------------------------Still an AllStar

T

TaxMonkey

Level 7

I'm curious how the answers to those questions would change anything - lets say the sale was an installment sale to a related party at below market value - would that change the applicability of the 121 exclusion? Not that it is ever a bad thing to ask questions, just trying to understand what be relevant in the specific case.

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