Do I pay capital gains tax on a sold home that I leased and lived in for years but owned for only two months?

by Jennifer L. Romberger, CPA | May 07, 2018

I leased a home for 10 years from a family member, and purchased it a month ago so I can sell it and move to a new home. I purchased it for the market value minus what I paid over the years, and sold it for $75,000 more than what I purchased it for on paper. Since I've lived there for more than two years but only owned it for two months, I have no idea what the capital gains situation would be.

Based on the facts presented, the $75,000 gain is a short-term capital gain that will be subject to your ordinary income rate for the respective tax year. I did look up exceptions to this, but unfortunately couldn’t find any specifically. There is still a chance that you may be able to get the gain excluded under the principal residence exclusion using your specific “facts and circumstances,” but more details would be needed, but frankly, I doubt it.

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Answered by: Jennifer L. Romberger, CPA, EA, is with Long Financial Group Inc. in Blue Bell, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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