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My overall question may require some background so I will detail some items. They may or may not apply.

I owned a home in Pa. from Dec 2007 until Aug 29, 2011 in my name only, even though I was married (we married several years after I purchased the home while I was single so we just left it that way). I had to file bankruptcy (discharged Aug 29, 2011) after a battle with cancer (I'm in remission since Nov 2011 though!). The home was included in the bankruptcy although we continued to live there (myself off and on, my wife virtually all the time. We were not separated, we simply lived long distances apart many months out of the year due to several personal family necessities) and only recently moved on Jan 15, 2015 to a rental in Pa. (now back permanently in the same home in Pa.). The bank bought back the home that was in the bankruptcy in July of 2013 through a sheriff's sale, so I'm guessing the home was still in my name until they bought it back even though it was included in the bankruptcy, although of this I'm not certain since I don't exactly know how that all works legally with it being part of the bankruptcy. It may not even apply to my question, which I promise to get to shortly).

My wife and I bought a home in Las Vegas, Nevada, with a closing date of Sept 30, 2011. I lived there using it as my permanent residence for 25 of the 37 months we owned it until moving permanently back to Pa. in March 2014. (It was sold Nov 2014). My wife only lived there for three months as a permanent address. Long story short, she finally left her job in Pa. and moved to the NV home in Dec 2013, but we jointly decided to move back to Pa. 3 months later.

So my question is: How do we file the sale of the home tax wise. I lived there 25 months, she lived there 3 months. We owned if for more than the required three years, and it was my permanent address just over the two year requirement. Our profit was about $60,000 and neither of us sold a home for profit in the prior five years. I realize there's a $250k exclusion per person if rules test is met. If filing jointly which we intend to, then there's a $500k exclusion available if both meet the rules test which we do not meet as a couple due to her only living there 3 months. WHen we were questioned by the escrow agent at time of sale, we honestly checked the box that I used it as permanent and wife did not. This resulted in a form that will go to the IRS meaning we have to put it on our tax return. I'm not sure how though, even though using tax software. It's simply not clear in the questions the software asks on how I should answer due to the slight complexity of the case in hand. Due I meet the rules test and get the $250k exclusion? Does no exclusion apply if we file jointly? Etc, etc. Quite confusing!

Any answers would be greatly appreciated!

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You should be able to exclude $250k. See the link below, but the short of it is that you meet the ownership test and you (but not her) meet the use test. Neither of you excluded a gain from the sale of a house in the prior 2 years.

http://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html

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