Other Non-Recognition Transactions

Question 1

Describe the principal residence-frequency test.

Answer 1

The exclusion is available no more frequently than every two years; limited exceptions.

Question 2

Describe the principal residence-ownership test.

Answer 2

The taxpayer must have owned the residence for at least two of the preceding five years.

Question 3

What is the gain on the sale of residence exclusion rule?

Answer 3

A taxpayer may exclude gains up to $250,000 ($500,000 joint return) on the sale of residence.

Question 4

Describe the principal residence-use test.

Answer 4

The residence is used by taxpayer as a principal residence for at least two of the preceding five years.

Question 5

Describe the wash-sale rule.

Answer 5

Losses from the sale of securities are not recognized if similar securities are purchased 30 days before or after the sale.

Question 6

Are losses on sales by related parties recognized?

Answer 6

Losses from sales of business/investment property to related parties are not recognized.

Question 7

What are the requirements for the $250,000 exclusion on sale of a residence rule?

Answer 7

1. Frequency test;
2. Ownership test;
3. Use test.