Sometimes I come across articles in the LA Times that are worth mentioning here on the Blog.  After all, it’s worth knowing when not to be short-changed.

Robert Bruss: Inman News writes: Three exceptions to two-year rule. Question: My wife and I divorced earlier this year. We owned and lived in our home for about 12 months before selling it. We earned a net profit of about $111,000. My tax advisor says we owe capital gains tax because we didn’t own and live in our home for 24 of the last 60 months before the sale. Do you agree?
Answer: No. Internal Revenue Code 121 provides three specific partial exceptions to the 24-month-minimum, principal-residence ownership and occupancy rule: health reasons, change of employment location qualifying for the moving expense tax deduction, and “unforeseen circumstances” such as divorce.

Based on your 12 months of ownership and occupancy, you and your ex-wife qualify for half of the full $500,000 principal-residence-sale exemption.

Your $111,000 capital gain is below this exempt amount so it appears your profit is fully tax exempt.