Jess wrote:

- quote -

If it's a single dwelling unit, then the regulation clearly
allows the exclusion. Note that they "dovetail" the rule
with the one for Section 280A and the vacation home/office
in home rules--which means you would need to explain if
somehow you had been taking a loss on the rental without
regard to Section 280A's limits. The regulations was
intentionally designed so you couldn't have your cake and
eat it too <grin> .

--
Ed Zollars, CPA
Phoenix, Arizona

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:
- quote -

Ed,
Thanks for your reply!

So you are saying if they do share the house (same kitchen,
living room, dining room and entrance, the 4 bedrooms are
the only area in the house dedicated to each roommate), he
is entitled to the $250,000 principle residence exemption
even though he is renting out such a large portion(75%) of
the house?

Thanks!

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Jess wrote:

- quote -

The keys issue is the separate dwelling unit rule found in
Regulation 1.121-1--if the 75% meets that test, then he
won't be treated as using that portion as his principal
residence. So you need to examine the exact facts of his
situation to see if he was truly "sharing" one dwelling unit
or whether his renter and he had, essentially, separate
dwelling units.

If they each had their own entrances, kitchen facilities,
restrooms and have to exit the building to go into the other
party's section, you have major problems <grin> .

See Regulation 1.121-1(e)(4) Example 4 for a discussion of
the separate dwelling unit rule.

--
Ed Zollars, CPA
Phoenix, Arizona

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Under the new December 2002 regulations, if you rent out
rooms in your home (principal residence), when you sell, you
no longer need to pay capital gain on the rental part of the
property. Is there any limitation on the proportion of home
rented ? What if the person rented out 75% of the house, is
he still ok ? (Assuming 2 out of 5 years requirement met)

He is single living in a four bedroom house with three roommates.

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