Jenna, who is single, sold her principal residence on December 1, 2017, and excluded the $150,000 gain because she met the ownership and usage requirements under Sec. 121. Jenna purchased another residence in Pensacola on January 1, 2018, that she occupied until July 1, 2018, when she received a new job offer from an employer in Miami. She sells the Pensacola residence on October 1, 2018, and
realizes a gain of $40,000. Jenna may exclude what amount of the gain from the sale on October 1, 2018?
A) $0
B) $10,000
C) $20,000
D) $40,000
A) $0
Since she has not met the two-year ownership and usage requirement on the Pensacola house the exclusion must be prorated. Months of usage in the Pensacola house are 6 months. The exclusion is 6/24, or 1/4 of $250,000 ($62,500). Therefore, none of the $40,000 gain is taxable.
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