Summary Test Bank: Spilker
Ind 2026: Chapter 14: Tax
Consequences of Home
Ownership
dwelling unit includes: - answer- -home
-condominium
-mobile home
-boat
-other similar property
dwelling may be used for: - answer- -solely personal use
-mixture of personal use and rental use
-solely rental use
for a given year, a dwelling unit may be a: - answer- -principal residence
-residence
-non-residence (rental property)
dwelling unit is residence if: - answer- -personal-use days are more than the greater of:
--14 days or 10% of the number of rental days during the year
-otherwise it is a nonresidence for tax purposes
personal use days include: - answer- -days a tax payer rents out property for less than
fair market value
-days a nonowner stays in the home under vacation home exchange or swap
-days taxpayer (owner) or other owner stays in the home
-days a relative of owner stays in the home even if relative pays full fair market value
rent
rental days include: - answer- -days when taxpayer rents property at FMV
-days spent repairing or maintaining home for rental use
--days that the home is available for rent but is not rented out are not personal or rental
days
is dwelling taxpayer's "principal" residence? - answer- -subjective determination
-may change from year to year
-only one residence can be principle residence for the year
, if more than one residence, then determined using facts and circumstances such as: -
answer- -mailing address
-amount of time spent at a residence
-proximity to place of employment
-principle residence of immediate family
sale of personal residence: - answer- typically gain or loss recognized on the sale of
personal residence is a capital gain or loss
-part or all of the gain might be excluded if the taxpayer meets certain requirements
because a personal residence is a "personal use asset", - answer- any loss recognized
on disposition of a personal residence is not deductible
maximum exclusion: - answer- -$500000 for married filing jointly taxpayers
-$250000 for other taxpayers
gain in excess of exclusion: - answer- -generally taxed as long term capital gains
-subject to preferential rates
to qualify for exclusion: - answer- must meet ownership and use tests
the ownership test: - answer- -taxpayer must have owned the property for a total of two
or more years during the 5 year period ending on the date of the sale
-if married taxpayers, either spouse can satisfy this requirement
-this requirement is meant to prevent a taxpayer from buying a home, fixing it up, and
soon thereafter selling it and excluding the gain
the use test: - answer- -taxpayer must have used the property as the taxpayers principal
residence for a total or two or more years during the 5 year period ending on the date of
the sale
-if married, both spouses must satisfy this requirement
-this requirement is meant to ensure that taxpayers are selling homes they actually lived
in instead of investment property
exceptions to general exclusion rules: nonqualified use limitation - answer- -amount of
realized gain eligible for exclusion is reduced based on the ratio of nonqualified use
divided by the period of time the taxpayer owned the home
-applies if taxpayer has nonqualified use of home on or after January 1, 2009
-nonqualified use includes time the home is not the taxpayers principal residence
exceptions to general exclusion rules: hardship circumstances - answer- -if the taxpayer
is required to sell before ownership/user requirements are met because of unusual
circumstances, exclusion is still available but maximum exclusion is reduced
-$500000 (MFJ) or $250000 * months taxpayer meets the ownership/use requirements /
24 months
Ind 2026: Chapter 14: Tax
Consequences of Home
Ownership
dwelling unit includes: - answer- -home
-condominium
-mobile home
-boat
-other similar property
dwelling may be used for: - answer- -solely personal use
-mixture of personal use and rental use
-solely rental use
for a given year, a dwelling unit may be a: - answer- -principal residence
-residence
-non-residence (rental property)
dwelling unit is residence if: - answer- -personal-use days are more than the greater of:
--14 days or 10% of the number of rental days during the year
-otherwise it is a nonresidence for tax purposes
personal use days include: - answer- -days a tax payer rents out property for less than
fair market value
-days a nonowner stays in the home under vacation home exchange or swap
-days taxpayer (owner) or other owner stays in the home
-days a relative of owner stays in the home even if relative pays full fair market value
rent
rental days include: - answer- -days when taxpayer rents property at FMV
-days spent repairing or maintaining home for rental use
--days that the home is available for rent but is not rented out are not personal or rental
days
is dwelling taxpayer's "principal" residence? - answer- -subjective determination
-may change from year to year
-only one residence can be principle residence for the year
, if more than one residence, then determined using facts and circumstances such as: -
answer- -mailing address
-amount of time spent at a residence
-proximity to place of employment
-principle residence of immediate family
sale of personal residence: - answer- typically gain or loss recognized on the sale of
personal residence is a capital gain or loss
-part or all of the gain might be excluded if the taxpayer meets certain requirements
because a personal residence is a "personal use asset", - answer- any loss recognized
on disposition of a personal residence is not deductible
maximum exclusion: - answer- -$500000 for married filing jointly taxpayers
-$250000 for other taxpayers
gain in excess of exclusion: - answer- -generally taxed as long term capital gains
-subject to preferential rates
to qualify for exclusion: - answer- must meet ownership and use tests
the ownership test: - answer- -taxpayer must have owned the property for a total of two
or more years during the 5 year period ending on the date of the sale
-if married taxpayers, either spouse can satisfy this requirement
-this requirement is meant to prevent a taxpayer from buying a home, fixing it up, and
soon thereafter selling it and excluding the gain
the use test: - answer- -taxpayer must have used the property as the taxpayers principal
residence for a total or two or more years during the 5 year period ending on the date of
the sale
-if married, both spouses must satisfy this requirement
-this requirement is meant to ensure that taxpayers are selling homes they actually lived
in instead of investment property
exceptions to general exclusion rules: nonqualified use limitation - answer- -amount of
realized gain eligible for exclusion is reduced based on the ratio of nonqualified use
divided by the period of time the taxpayer owned the home
-applies if taxpayer has nonqualified use of home on or after January 1, 2009
-nonqualified use includes time the home is not the taxpayers principal residence
exceptions to general exclusion rules: hardship circumstances - answer- -if the taxpayer
is required to sell before ownership/user requirements are met because of unusual
circumstances, exclusion is still available but maximum exclusion is reduced
-$500000 (MFJ) or $250000 * months taxpayer meets the ownership/use requirements /
24 months
