Question: Jasper is single and has lived in a house his father owns for the last five years. He paid the mortgage and property taxes and maintained the upkeep on the home while he lived there. On Feb. 2, 2020, Jasper’s father decided to sell the home. He wants Jasper to report the sale and exclude the gain under §121 because he used the home as his principal residence for all five years ending on the date of sale. Is Jasper able to claim the exclusion under §121 if his father owns the property at the time of sale?
Answer: Yes. If the state where Jasper resides recognizes equitable ownership, he can claim the gain exclusion up to $250,000 for a single taxpayer. In Paul L. Blanton, et ux. v. Commissioner, TC Memo 1998-211, a taxpayer who met the equitable ownership rules was allowed to exclude the gain on sale even though they were not listed on the title of the property that was sold.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.