Louis owns a condominium in New Orleans which has been his principal residence f

Question

Louis owns a condominium in New Orleans which has been his principal residence for 12 years. He wants to be near Lake Ponchartrain since he enjoys water activities. Therefore, he sells the condominium. His original intent was to purchase a house in New Orleans near the lake. However, the cost of such properties far exceeded his sales proceeds. He was able to purchase a house on the lake in Covington, which is located across the causeway. He invested all of his sales proceeds in the Covington house. After two months of commuting over an hour to and from work each day. he decides to rent an efficiency apartment in New Orleans near his office. He spends the weekends and vacations at his home in Covington. Does Louis qualify for exclusion of gain under § 121 Does his Covington house qualify as his principal residence

Explanation / Answer

Part A)

Yes, Louis would qualify for exclusion of gain under Section 121. It is so because, the residence was owned and occupied by Louis for a period of atleast during the immediately preceeding 5 years on the date of sale. This is as per the provision of Section 121 (a) of IRS.

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Part B)

No, Louis's Covington house will not qualify as his principal residence. As per the provision of IRS, a place is classified as the principal residence, where the property is occupied and used by the owner for most of the time. In the given case, the efficiency apartment in New Orleans will be treated as the principal place of residence.

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