ob13000 <ob13000[at]flashmail.com> wrote:

- quote -

I assume that you have been claiming the rental income and
depreciation each year? on Schedule E.

- quote -

That is correct.

- quote -

Not necessarily. You must meet one of the exceptions to the
2-in-5 rule, which is not apparent in your post. In most
cases, you either meet it (EXCLUSION) or not (NO
EXCLLUSION).

- quote -

Besides, your "understanding is wrong.

- quote -

That would, then all you have to do is RESIDE there for the
next two years. Your wife also, if you want the full
$500,000 exclllusion.

- quote -

Why not sell your existing residence and move into the
vacation home? If you meet the OWNERSHIP and RESIDENCY
conditions for the present residence, you can exclude up to
$500,000 of gain on sale. Live in the vacation home for two
years and then sell it, once again excluding the gain. Then
buy your retirement home with your excluded gains from both
sales.

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I have a home out of state, a vacation home. I have however
rented it three months a year to friends from the cold
country for the last 6 years, which helps me to pay for it.
The rental pays a minor portion of the expenses for the
year. I keep lots of stuff there. Boat, car, etc.

I may sell it, and I am trying to find what I would have to
do to establish it as my primary residence for some period
of time, enough to shelter the expected $125,000-150,000 in
gain on the eventual sale.

I am not presently employed anywhere, so that doesn't
establish my residence at my present home. I am married.

Capital gains on a primary residence are exempt from
taxation up to $250,000 per person, $500,000 per married
couple. It is required the home be a primary residence for 2
out of the last 5 years. Partial periods count for partial
exemption.

My understanding is as follows:
If I live there for 6 months (and I don't actually have to
STAY there at all times, I can go other places, leaving my
wife at our other home), I can shelter 6/24 of the $250,000
in gain waiver I am personally eligible for, or $62,500.
Not enough.

So if I go there, move in, register to vote, have my mail
forwarded, etc., file my taxes in that state, why wouldn't
that establish my residence at that home?

Is there anything I would need to do to make this golden and
incontestable short of moving my wife as well? I will do
that if necessary, I need the money for my retirement.

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