Basic Federal Income Taxation: Property Transactions: Exclusion of Gain on the Sale of a Principal Residence

This lesson is best used after studying Federal Income Taxation: Property Transaction, in class. The lesson includes problem sets to work through, allowing you to apply the Code and Regs. to a variety of situations involving exclusion of gain on the sale of a principal residence, under IRS Code section 121.

Learning Outcomes

On completion of the lesson, the student will be able to:

1. Recognize that § 121 provides a permanent exclusion for up to $250,000 (or $500,000 for joint returns) of gain on the sale of a principal residence.
2. Calculate the amount of gain excluded under § 121 on the sale of a principal residence.
3. List the circumstances that may reduce the maximum § 121 exclusion amount.