IThe Internal Revenue Code recognizes the importance of home ownership by allowing you to exclude gain when you sell your main home. To qualify for the maximum exclusion of gain ($250,000 or $500,000 if married filing jointly), you must meet certain eligibility tests.
You may take the exclusion, whether maximum or partial, only on the sale of a home that is your principal residence, meaning your main home. An individual has only one main home at a time. If you own and live in just one home, then that property is your main home. If you own or live in more than one home, then you must apply a "facts and circumstances" test to determine which property is your main home. While the most important factor is where you spend the most time, other factors are relevant as well.
Additional Factors in Determining which is your main home.
The more of these factors that are true of a home, the more likely that it is your main home. The address listed on your: U.S. Postal Service address, Voter Registration Card, Federal and state tax returns, and Driver's license or car registration. The home is near: Where you work, Where you bank, The residence of one or more family members, and Recreational clubs or religious organizations of which you are a member.
Residency Day Count Tracking for the Home Sale Exclusion Rule
As should be apparent from this discussion, day count tracking is a critical factor in establishing that you are bona fide resident of Puerto Rico. The Domicile365 App has been designed to provide precise day count tracking for individuals and enterprises. Set up specific day count alerts for Puerto Rico in the App. For more information on the Domicile365 App and its day count tracking features, please see our software page and download the Domicile365 App . Available for Apple and Android devices.
Importance of Careful Compliance
It is important that these issues be properly considerated and analyzed. The U.S. Internal Revenue Service has indicated that it intends to strictly review these matters and has even brought criminal charges against individuals that have, in their view, flouted these rules. See Indictment. Reports indicate that there are ongoing civil and criminal investigations into taxpayer non-compliance in this area.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors regarding these matters.