From:  Rosarin
Date:  26 Mar 2009

I have two houses I am planning to short sell because my husband lost his job. Both qualify for the exclusion from gain for sale of a principal residence. We have lived in our current home for over two years and we also lived in the previous home for two of the last five years. If I short sell both of them, would they both qualify for the exclusion for cancellation of debt for a principal residence?

Thank you for your time.

RD

Answer

Date:  6 Apr 2009

Hello Rosarin,

No. Different rules apply for determining whether a residence is a principal residence under the cancellation of debt rules, which is based on whether the residence qualifies as a principal residence for deducting mortgage interest.

You can only have one principal residence at a time under these rules, which would be your current residence.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

Subscribe to Michael Gray, CPA's Tax & Business Insight Name: Email: We respect your email privacy Powered by AWeber Email Marketing