Escrow & Title
A Washington property owner sells their home and receives net proceeds of $180,000 after the mortgage payoff and closing costs. The seller used the proceeds to purchase a replacement home. For capital gains tax purposes, the seller:
AOwes no capital gains tax because they reinvested the proceeds
BMay exclude up to $250,000 ($500,000 for married couples) of gain if the home was their primary residence for at least 2 of the last 5 years✓ Correct
COwes capital gains tax on all $180,000 net proceeds
DMust file a 1031 exchange to defer the gains
Explanation
Under IRC Section 121, homeowners who have owned and used their home as a primary residence for at least 2 of the last 5 years may exclude up to $250,000 of capital gain ($500,000 for married couples filing jointly) from federal income tax.
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