Screen a home sale against the principal-residence exclusion
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- Record the dates the taxpayer owned the home and the dates the taxpayer used it as a principal residence during the five years ending on the sale. Note any earlier home sale on which gain was excluded in the two years before this sale, and whether the return is joint.
- What the lawyer must review
- 26 U.S.C. § 121 excludes gain on the sale or exchange of property if, during the five-year period ending on the sale, the taxpayer owned and used the property as the taxpayer's principal residence for periods aggregating two years or more. The excluded gain cannot exceed $250,000. The section substitutes $500,000 for certain joint returns when either spouse meets the ownership requirement, and Topic 701 states the joint pattern the lawyer applies: either spouse may meet the ownership test, and both spouses must meet the use test individually. Topic 701 also says the taxpayer generally cannot use the exclusion if gain from another home was excluded during the two-year period before the sale. The statute has a heading limiting the exclusion to one sale or exchange every two years.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Do not begin AI assistance until the responsible lawyer has defined and confirmed its permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.