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My wife and I purchased our home in August of 2014, but now she has been accepted into a doctoral degree program 200 miles away, so we need to sell the house and move. Unfortunately, we might be selling it prior to August 2016... depending on how quick our house sells.

As far as Capital Gains tax is concerned... we will not have resided in it for "at least 2 years in a 5 year period."

I'm wondering if moving for school would count as a "unforseen circumstance" for the IRS to allow us to exclude any capital gains? I can't find any specific examples of this scenario with a definitive answer using my Google-fu.

Thanks!

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    If it doesn't sell the day you list it, it's not unreasonable for you to put "September 1 closing date" in your counter offer. – user662852 Apr 20 '16 at 21:44
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    @Victor i don't understand. A listing in the MLS database is not a binding contract. There is no contract to view. The buyer makes the first candidate contract. Most settlements take over 60 days unless the buyer is a cash buyer. We're about 130 days from Sept today. The OP stated "we might" so i assumed they are not on the market and unlikely to list "today". If they take 2-3 weeks to clean, paint, etc, and take 1-2 weeks for a qualified offer, to reiterate my original comment, it would not be unreasonable to counter with Sept 1 (or the August anniversary date of first buy) – user662852 Apr 21 '16 at 1:25
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    We seem to be drifting off the question that was asked...? – keshlam Apr 21 '16 at 2:03
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    @Victor sounds like you have material to start a new question about real estate sales process in the US. I will look for that instead of responding in comments – user662852 Apr 21 '16 at 11:09
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    Are you sure you have a gain? A typical 5% to the agent, plus lawyer costs, you may have so little gain the tax isn't worth strategizing over. On the other hand, a huge gain can be avoided by a divorce. (And spend the savings on a vacation to celebrate the remarriage.) – JTP - Apologise to Monica Apr 21 '16 at 19:02
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Simply put, no. Your move is voluntary.

https://www.irs.gov/uac/IRS-Issues-Home-Sale-Exclusion-Rules

However, you may still have options.

You may be able to rent an apartment near your wife's school and retain use of your current house as your 'main home' by IRS definition and keep it eligible as your primary residence through August. This is a gray area, since your 'primary residence' and 'main home' are defined circumstantially and factually. Definitely seek professional counsel if you decide to do this.

https://www.irs.gov/publications/p523/ar02.html#en_US_2015_publink1000200611

This will be plenty of hassle and extra $$, so make sure your tax savings will be worth it.

Otherwise, this is a short-term expense for a better career path! Congratulations!

  • Or you stay in the house until September, wife rents an apartment (or room, for cheaper) and comes home on weekends. That also gives you time for job hunting or whatever else you need to do for the move. – jamesqf Apr 21 '16 at 17:14
  • @jamesqf Exactly. That may qualify you for the exemption. Of course, the expense of the rental and the travel had better be cheaper than your tax savings! – jkuz Apr 21 '16 at 17:16
  • @jkuz this is exactly what I was looking for. To us, it feels like our options are limited because the field she is going for (veterinary medicine) is so cut-throat and you really just have to take what you can get... but to the government, it is a voluntary decision. Thanks! – Flaid Apr 22 '16 at 2:54

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