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Original Fast Forward Academy test bank question:
In 2001, Helen Jones lived in a rented apartment. The apartment building was converted to condominiums, and she bought her same apartment on December 3, 2008. In 2009, Helen became ill and on April 14 of that year she moved to her daughter's home. On July 12, 2011, while still living in her daughter's home, she sold her condominium for gain. Can she exclude her gain from her income?
A. No, because she did not own the property for the entire time she lived there.
B. No, because she did not live in the property for the entire time she owned it.
C. Yes, because she moved out only because she was ill.
D. Yes, because she meets both the ownership and use tests.
A taxpayer can meet the ownership and use tests during different two-year periods. However, the taxpayer must meet both tests during the five-year period ending on the date of the sale. So, Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the five-year period from July 13, 2005, to July 12, 2011, the date she sold the condominium: She owned her condominium from December 3, 2008, to July 12, 2011, which is more than 2 years, and she lived in the property from at least July 13, 2005 until April 14, 2009, which is more than two years. The time Helen lived in her daughter's home during the five-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the five-year period can be counted toward her period of use.
FFA RTRP Book Reference: CH 4 Items Excluded from Gross Income
Subsection: Property real and personal
Subject: Property sales (e.g., real and personal such as homes, stocks, and businesses, internet sales)
Correct Answer: D
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