California Real Estate Practice Exam

How many years must Mr. and Mrs. Yearsley have resided on the premises to qualify for the capital gains tax exemption?

1. None of the above

2. One Year

3. Six months

4. Two years

The correct answer is: None of the above

To qualify for the capital gains tax exemption on the sale of their primary residence, Mr. and Mrs. Yearsley must have lived in the home for at least two years within the five-year period leading up to the sale. This exemption, which allows eligible homeowners to exclude a significant amount of capital gains from taxation, is designed to provide relief for those who own and occupy their property as their primary residence. While shorter residency periods, such as six months or one year, might allow for some other tax considerations or deductions, they do not fulfill the specific requirement necessary to qualify for the full capital gains tax exemption. Thus, the correct choice aligns with the mandated two-year residency period to successfully take advantage of this tax benefit.