One plus rule on capital gains.

[cynthiagarner]

I bought a home in 2013 and lived there until 2015, June.  At that time moved in with BF and got married.  In 2016 he sold HIS home and we moved back into my home in May 2016 to fix it up and then sold in 2017 to move to the country.  

While I was living in his home, we rented the home and claimed the rental income on my tax return.

Am I subject to capital gains on the year, or because it was my principal residence in 2015 and 2016 am I exempt?

[TurboTax-Peky · Accepted solution]

For the purpose of this question, I'm assuming you did not have any other homes where you claimed it as your principal residence in any of the years in question (i.e. 2013 through 2017).

Your situation is very unique, and you may qualify for complete exemption due to the "+1". In particular, the years you need to declare whether this is your principal residence are: 2013, 2014, 2015, 2016, and 2017. In your situation, it is clear that you would be able to claim this home as your principal residence for 2013, 2014 and 2017.

The years that are unclear are 2015 and 2016, because midway through the year you moved into your BF's home and then subsequently moved back into your home the following year. Under the definition of Principal Residence, it must be "a housing unit [that] was ordinarily inhabited in the year by the taxpayer". However, it will NOT be considered your Principal Residence if there was another property that was designated as principal residence by the taxpayer or "by a person who was throughout the year the taxpayer's spouse or common-law partner".

Based on what you said, in 2015, you did ordinarily inhabit your home in the year (i.e. it was where you ordinarily inhabited prior to moving out) and your BF was NOT your common-law partner throughout the year (assuming you were not common-law prior to moving in with each other and nor was he your legally married spouse). So 2015 your home should be considered your Principal Residence.

As for 2016, again you did ordinarily inhabit your home in the year (when you moved back in). However, in this year your BF is likely to have become your common-law partner by the end of the year, and I also don't know if your BF declared his home as principal residence for 2016. In sum, based on the facts, it is unclear whether you can declare you home in 2016 as your principal residence.

However, because of the for +1, if you declare 2013-2015, and 2017 as your principal residence. The +1 will take care of 2016, so then you should be covered.