In 2003, the IRS issued new liberalized rules interpreting the $250,000 principal residence sale tax exemption (up to $500,000 for a married couple filing jointly) and the first court case interpreting Internal Revenue Code 121 was decided. Before getting to the new developments, let's review the basic rules.
THE EASY ELIGIBILITY RULES. Internal Revenue Code 121, enacted by Congress in 1997, offers up to $250,000 tax-free principal residence sale capital gains. A qualified married couple can claim up to $500,000 tax-free sales home profits. more...