Dear Mr. Azrael:

I am retired and a current resident of another state where I live at my parents' home. My primary residence is in the state of Maryland. My daughter and granddaughter live at my Maryland residence.

When I sell my primary residence in Maryland, can I qualify for the tax exemption for the gain on the sale of this home?

J. Blair Severn

Dear J. Blair:

The IRS allows individual taxpayers to exclude a gain on the sale of their main home. To qualify for the exclusion, a taxpayer must meet both an ownership test and a use test.

The ownership test requires that the taxpayer own the home for at least two years ending on the date of sale. The use test requires that the taxpayer lived in the home as a primary residence at least two years during the five years ending on the date of sale.

For taxpayers who meet both tests, the gain on the sale of a main home is excluded from income up to $250,000; or $500,000 if all of the following are true: a) the taxpayer is married and files a joint return for the year of the sale; b) either the taxpayer or his or her spouse meets the ownership test; c) both the taxpayer and his or her spouse meets the use test.

For a home to be a taxpayer's main home or primary residence, the taxpayer must live there at least six months out of a 12-month period. Short, temporary absences of a taxpayer from a main home are counted as periods of use, even if the taxpayer rents the property during absences.

A reduced exclusion is available if a taxpayer did not meet the ownership or use test because the home was sold due to: a) a change in place of employment; b) health; c) unforeseen circumstances as described in IRS regulations.

In your case, you appear to meet the ownership test. You may not meet the use test unless you have lived in the home as your primary residence for at least two years out of the five years immediately preceding the date of sale.

For complete information on excluding the gain from the sale of your main home, consult IRS Publication 523, which may be downloaded from the IRS Web site or obtained from your local IRS office.