Solved

I'm in the military and looking to sell my house before the 2 year capital gains exemption. Im pcsing and wondering if there is an exemption for military on meeting 2yrs?

Forum|Forum|6 years ago
June 4, 2019
1 reply
0 views

No text available

TurboTax Free Edition Online

Best answer by TomD8

There is such an exemption. Here's the IRS rule:

If you are a member of the Uniformed Services or the Foreign Service, or an employee of the intelligence community in the United States, you may choose to suspend the 5-year test period for ownership and use if you are on qualified official extended duty. This means you may be able to meet the 2-year residence test even if, because of your service, you didn’t actually live in your home for at least the 2 years during the 5-year period ending on the date of sale.

Example.

John bought and moved into a home in 2007. He lived in it as his main home for 2½ years. For the next 6 years, he didn’t live in it because he was on qualified official extended duty with the Army. He then sold the home at a gain in 2015. To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. This means he can disregard those 6 years. Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period.

Qualified extended duty.

You are on qualified extended duty if:

You are called or ordered to active duty for an indefinite period, or for a definite period of more than 90 days.

You are serving at a duty station at least 50 miles from your main home, or you are living in government quarters under government orders.

You are one of the following:
1. A member of the armed forces (Army, Navy, Air Force, Marine Corps, Coast Guard);
2. A member of the commissioned corps of National Oceanic and Atmospheric Administration (NOAA) or the Public Health Service;
3. A Foreign Service chief of mission, ambassador-at-large, or officer;
4. A member of the Senior Foreign Service or the Foreign Service personnel; or
5. An employee, enrolled volunteer, or enrolled volunteer leader of the Peace Corps serving outside the United States. https://www.irs.gov/publications/p523

T

TomD8Answer

There is such an exemption. Here's the IRS rule:

If you are a member of the Uniformed Services or the Foreign Service, or an employee of the intelligence community in the United States, you may choose to suspend the 5-year test period for ownership and use if you are on qualified official extended duty. This means you may be able to meet the 2-year residence test even if, because of your service, you didn’t actually live in your home for at least the 2 years during the 5-year period ending on the date of sale.

Example.

John bought and moved into a home in 2007. He lived in it as his main home for 2½ years. For the next 6 years, he didn’t live in it because he was on qualified official extended duty with the Army. He then sold the home at a gain in 2015. To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. This means he can disregard those 6 years. Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period.

Qualified extended duty.

You are on qualified extended duty if:

You are called or ordered to active duty for an indefinite period, or for a definite period of more than 90 days.

You are serving at a duty station at least 50 miles from your main home, or you are living in government quarters under government orders.

You are one of the following:
1. A member of the armed forces (Army, Navy, Air Force, Marine Corps, Coast Guard);
2. A member of the commissioned corps of National Oceanic and Atmospheric Administration (NOAA) or the Public Health Service;
3. A Foreign Service chief of mission, ambassador-at-large, or officer;
4. A member of the Senior Foreign Service or the Foreign Service personnel; or
5. An employee, enrolled volunteer, or enrolled volunteer leader of the Peace Corps serving outside the United States. https://www.irs.gov/publications/p523

**Answers are correct to the best of my ability but do not constitute tax or legal advice.

T

TaxGuyBill

The special provision you posted is if they met the 2 year rule, but are past the 5 year rule.

However, moving due to military reassignment is considered as a 'job' move, with qualifies for the Reduced Maximum Exclusion.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p523#en_US_2016_publink10009004">https://www.irs.gov/publications/p523#en_US_2016_publink10009004</a>