Question

Ed owned and used his home in Kentucky as his principal residence for 15 years. He moved to another state in the 16th year and rented the Kentucky home. Two years later he sold the Kentucky home. Ed's brother, Fred, had two houses. Fred owned and used his home in Tennessee as his principal residence for 10 years. He had another home in Florida. In the 11th year, he moved into his Florida home. He resided there for 3 years and then sold the Florida home. Which brothers has "nonqualified use" of his principal residence that will reduce the exclusion on the gain on a sale of a personal residence?

Answer 1

Fred has "nonqualified use" of his principal residence that will reduce the exclusion on the gain on a sale of a personal residence.

Explanation:

Fred moved into his house post a period of “nonqualified use”.  Nonqualified use can be stated as any period during which the particular asset is not used as the primary residence of the owner or taxpayer.

If a taxpayer moves between two houses, using each as his residence for consecutive periods of time, the home that the owner uses for most of the time will be stated as the person's principal residence.