1 See References in Text note below.
(as in effect on the day before the date of the enactment of this section) in the nonrecognition of any part of the gain realized on the sale or exchange of another residence, in determining the period for which the taxpayer has owned and used such property as the taxpayer’s principal residence, there shall be included the aggregate periods for which such other residence (and each prior residence taken into account under section 1223(6) 
Editorial Notes
References in Text

The date of the enactment of this paragraph, referred to in subsec. (d)(9)(C)(ii), (iii), is the date of enactment of Puspan. L. 108–121, which was approved Nov. 11, 2003.

Section 103 of the Foreign Service Act of 1980, referred to in subsec. (d)(9)(C)(iii), is classified to section 3903 of Title 22, Foreign Relations and Intercourse.

Section 1034 (as in effect on the day before the date of the enactment of this section), referred to in subsec. (g), probably means section 1034 of this title as in effect on the day before the date of enactment of Puspan. L. 105–34 which amended this section generally and was approved Aug. 5, 1997. Section 1034 was repealed by Puspan. L. 105–34, title III, § 312(span), Aug. 5, 1997, 111 Stat. 839.

Section 1223(6), referred to in subsec. (g), was repealed by Puspan. L. 113–295, div. A, title II, § 221(a)(80)(C), Dec. 19, 2014, 128 Stat. 4049.

Codification

Puspan. L. 109–135, title IV, § 403(ee)(1), (nn), Dec. 21, 2005, 119 Stat. 2631, 2632, which directed that subsec. (d) of this section be amended by redesignating the paragraph (10) relating to property acquired from a decedent as paragraph (11), effective as if included in the provisions to which such amendment relates of the American Jobs Creation Act of 2004, Puspan. L. 108–357, was executed as the probable intent of Congress by redesignating as paragraph (11) the paragraph (10) directed to be added to subsec. (d) of this section by Puspan. L. 107–16, § 542(c), (f)(1), applicable to estates of decedents dying after Dec. 31, 2009. See Codification note, 2001, 2003, and 2005 Amendment notes, and Effective Date of 2005 Amendment note below.

Puspan. L. 108–121, title I, § 101(a), (span)(1), Nov. 11, 2003, 117 Stat. 1336, which directed that subsec. (d) of this section be amended by redesignating paragraph (9) as (10) and adding a new paragraph (9), effective as if included in the amendments made by section 312 of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, could not literally be executed insofar as it directed the redesignation because subsec. (d), as amended by Puspan. L. 105–34, did not contain a paragraph (9). However, to reflect the probable intent of Congress, the amendment was executed by redesignating as paragraph (10) the paragraph (9) directed to be added to subsec. (d) of this section by Puspan. L. 107–16, § 542(c), (f)(1), applicable to estates of decedents dying after Dec. 31, 2009. See Codification note above and 2001, 2003, and 2005 Amendment notes and Effective Date of 2003 Amendment note below.

Prior Provisions

A prior section 121 was renumbered section 140 of this title.

Amendments

2017—Subsec. (d)(3)(B). Puspan. L. 115–97, § 11051(span)(3)(A)(i), struck out “(as defined in section 71(span)(2))” after “divorce or separation instrument”.

Subsec. (d)(3)(C). Puspan. L. 115–97, § 11051(span)(3)(A)(ii), added subpar. (C).

2014—Subsec. (span)(3). Puspan. L. 113–295, § 221(a)(20), struck out subpar. (A) designation and span and subpar. (B) and realigned margins. Prior to amendment, text of subpar. (B) read as follows: “Subparagraph (A) shall be applied without regard to any sale or exchange before May 7, 1997.”

Subsec. (span)(4), (5). Puspan. L. 113–295, § 212(c), redesignated par. (4), relating to exclusion of gain allocated to nonqualified use, as (5).

Subsec. (d)(12)(B). Puspan. L. 113–295, § 213(c)(1), inserted “of paragraph (9)” after “and (D)”.

2010—Subsec. (d)(11). Puspan. L. 111–312 amended subsec. (d) to read as if amendment by Puspan. L. 107–16, § 542(c), which originally added par. (9), had never been enacted. See Codification notes above and 2001 Amendment note and Effective Date of 2010 Amendment note below. Prior to amendment, par. (11) read as follows: “Property acquired from a decedent.—The exclusion under this section shall apply to property sold by—

“(A) the estate of a decedent,

“(B) any individual who acquired such property from the decedent (within the meaning of section 1022), and

“(C) a trust which, immediately before the death of the decedent, was a qualified revocable trust (as defined in section 645(span)(1)) established by the decedent,

determined by taking into account the ownership and use by the decedent.”

2008—Subsec. (span)(4). Puspan. L. 110–289 added par. (4) relating to exclusion of gain allocated to nonqualified use.

Subsec. (d)(9)(C)(vi). Puspan. L. 110–245, § 113(span), struck out span and text of cl. (vi). Text read as follows: “An employee of the intelligence community shall not be treated as serving on qualified extended duty unless such duty is at a duty station located outside the United States.”

Subsec. (d)(9)(E). Puspan. L. 110–245, § 113(a), struck out span and text of subpar. (E). Text read as follows: “Clause (iii) of subparagraph (A) shall not apply with respect to any sale or exchange after December 31, 2010.”

Subsec. (d)(12). Puspan. L. 110–245, § 110(a), added par. (12).

2007—Subsec. (span)(4). Puspan. L. 110–142 added par. (4) relating to special rule for certain sales by surviving spouses.

Subsec. (d)(9)(E). Puspan. L. 110–172 added subpar. (E).

2006—Subsec. (d)(9). Puspan. L. 109–432, § 417(d), substituted “Uniformed services, Foreign Service, and intelligence community” for “Members of uniformed services and Foreign Service” in span.

Subsec. (d)(9)(A). Puspan. L. 109–432, § 417(a), substituted “duty—

“(i) as a member of the uniformed services,

“(ii) as a member of the Foreign Service of the United States, or

“(iii) as an employee of the intelligence community.”

for “duty as a member of the uniformed services or of the Foreign Service of the United States.”

Subsec. (d)(9)(C)(iv), (v). Puspan. L. 109–432, § 417(span), added cl. (iv) and redesignated former cl. (iv) as (v).

Subsec. (d)(9)(C)(vi). Puspan. L. 109–432, § 417(c), added cl. (vi).

2005—Subsec. (d)(10). Puspan. L. 109–135, § 403(ee)(2), amended span and text of par. (10) relating to property acquired in like-kind exchange generally. Prior to amendment, text read as follows: “If a taxpayer acquired property in an exchange to which section 1031 applied, subsection (a) shall not apply to the sale or exchange of such property if it occurs during the 5-year period beginning with the date of the acquisition of such property.”

Subsec. (d)(11). Puspan. L. 109–135, § 403(ee)(1), redesignated par. (10), formerly par. (9), as added by Puspan. L. 107–16, as (11). See Codification notes above and 2001 and 2003 Amendment notes and Effective Date of 2001 Amendment note below.

Subsec. (g). Puspan. L. 109–135, § 402(a)(3), substituted “section 1223(6)” for “section 1223(7)”.

2004—Subsec. (d)(10). Puspan. L. 108–357 added par. (10) relating to property acquired in like-kind exchange.

2003—Subsec. (d)(9), (10). Puspan. L. 108–121 added par. (9) and redesignated former par. (9), as added by Puspan. L. 107–16, as (10). See Codification notes above and 2001 Amendment note and Effective Date of 2001 Amendment note below.

2001—Subsec. (d)(9). Puspan. L. 107–16, § 542(c), added par. (9). See Codification notes above and Effective Date of 2001 Amendment note below.

1998—Subsec. (span)(2). Puspan. L. 105–206, § 6005(e)(1), substituted “Special rules for joint returns” for “$500,000 limitation for certain joint returns” in span and amended text generally. Prior to amendment, text read as follows: “Paragraph (1) shall be applied by substituting ‘$500,000’ for ‘$250,000’ if—

“(A) a husband and wife make a joint return for the taxable year of the sale or exchange of the property,

“(B) either spouse meets the ownership requirements of subsection (a) with respect to such property,

“(C) both spouses meet the use requirements of subsection (a) with respect to such property, and

“(D) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3).”

Subsec. (c)(1). Puspan. L. 105–206, § 6005(e)(2), reenacted span without change and amended text generally. Prior to amendment, text read as follows: “In the case of a sale or exchange to which this subsection applies, the ownership and use requirements of subsection (a) shall not apply and subsection (span)(3) shall not apply; but the amount of gain excluded from gross income under subsection (a) with respect to such sale or exchange shall not exceed—

“(A) the amount which bears the same ratio to the amount which would be so excluded under this section if such requirements had been met, as

“(B) the shorter of—

“(i) the aggregate periods, during the 5-year period ending on the date of such sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence, or

“(ii) the period after the date of the most recent prior sale or exchange by the taxpayer to which subsection (a) applied and before the date of such sale or exchange,

bears to 2 years.”

1997—Puspan. L. 105–34 amended section catchline and text generally. Prior to amendment, section related to one-time exclusion of gain from sale of principal residence by individual who had attained age 55.

1988—Subsec. (d)(9). Puspan. L. 100–647 added par. (9).

1981—Subsec. (span)(1). Puspan. L. 97–34 substituted “$125,000 ($62,500” for “$100,000 ($50,000”.

1978—Puspan. L. 95–600, § 404(a), substituted “One-time exclusion of gain from sale of principal residence by individual who has attained age 55” for “Gain from sale or exchange of residence of individual who has attained age 65” in section catchline.

Subsec. (a). Puspan. L. 95–600, § 404(a), substituted “55” for “65”, “5-year” for “8-year”, and “3 years” for “5 years”.

Subsec. (span). Puspan. L. 95–600, § 404(a), in par. (1) substituted provisions respecting dollar limitations for amount of gain for provisions setting forth applicable limitations where the adjusted sales price exceeds $35,000 and added par. (3).

Subsec. (d)(2). Puspan. L. 95–600, § 404(c)(1), substituted “5-year period” for “8-year period”.

Subsec. (d)(5). Puspan. L. 95–600, § 404(c)(2), substituted “5-year period” for “8-year period” and “3 years” for “5 years”.

Subsec. (d)(8). Puspan. L. 95–600, § 404(span), added par. (8).

1976—Subsec. (span)(1). Puspan. L. 94–455, § 1404(a), substituted “$35,000” for “$20,000” in three places.

Subsecs. (c), (d)(5). Puspan. L. 94–455, § 1906(span)(13)(A), struck out “or his delegate” after “Secretary”.

Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment

Amendment by Puspan. L. 115–97 applicable to any divorce or separation instrument (as defined in former section 71(span)(2) of this title as in effect before Dec. 22, 2017) executed after Dec. 31, 2018, and to such instruments executed on or before Dec. 31, 2018, and modified after Dec. 31, 2018, if the modification expressly provides that the amendment made by section 11051 of Puspan. L. 115–97 applies to such modification, see section 11051(c) of Puspan. L. 115–97, set out as a note under section 61 of this title.

Effective Date of 2014 Amendment

Amendment by section 212(c) of Puspan. L. 113–295 effective as if included in the provisions of the Housing Assistance Tax Act of 2008, Puspan. L. 110–289, div. C, to which such amendment relates, see section 212(d) of Puspan. L. 113–295, set out as a note under section 42 of this title.

Puspan. L. 113–295, div. A, title II, § 213(d), Dec. 19, 2014, 128 Stat. 4034, provided that: “The amendments made by this section [amending this section and sections 125 and 877 of this title and provisions set out as a note under section 6511 of this title] shall take effect as if included in the provisions of the Heroes Earnings Assistance and Relief Tax Act of 2008 [Puspan. L. 110–245] to which they relate.”

Amendment by section 221(a)(20) of Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective and Termination Dates of 2010 Amendment

Puspan. L. 111–312, title III, § 301(e), Dec. 17, 2010, 124 Stat. 3301, provided that: “Except as otherwise provided in this section, the amendments made by this section [amending this section and sections 170, 684, 1014, 1040, 1221, 1246, 1291, 1296, 2505, 4947, 6018, 6019, 6075, and 7701 of this title and repealing sections 1022, 2210, 2664, and 6716 of this title] shall apply to estates of decedents dying, and transfers made, after December 31, 2009.”

Puspan. L. 111–312, title III, § 304, Dec. 17, 2010, 124 Stat. 3304, which provided that section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001, Puspan. L. 107–16, would apply to the amendments made by title III of Puspan. L. 111–312, was repealed by Puspan. L. 112–240, title I, § 101(a)(2), Jan. 2, 2013, 126 Stat. 2315.

[Amendment by Puspan. L. 112–240 (repealing section 304 of Puspan. L. 111–312, formerly set out above) applicable to taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012, see section 101(a)(3) of Puspan. L. 112–240, set out as a note following former section 901 of Puspan. L. 107–16 which was set out as an Effective and Termination Dates of 2001 Amendment note under section 1 of this title.]

Effective Date of 2008 Amendment

Puspan. L. 110–289, div. C, title III, § 3092(span), July 30, 2008, 122 Stat. 2912, provided that: “The amendment made by this section [amending this section] shall apply to sales and exchanges after December 31, 2008.”

Puspan. L. 110–245, title I, § 110(span), June 17, 2008, 122 Stat. 1634, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 2007.”

Puspan. L. 110–245, title I, § 113(c), June 17, 2008, 122 Stat. 1635, provided that: “The amendments made by this section [amending this section] shall apply to sales or exchanges after the date of the enactment of this Act [June 17, 2008].”

Effective Date of 2007 Amendment

Puspan. L. 110–142, § 7(span), Dec. 20, 2007, 121 Stat. 1806, provided that: “The amendment made by this section [amending this section] shall apply to sales or exchanges after December 31, 2007.”

Effective Date of 2006 Amendment

Puspan. L. 109–432, div. A, title IV, § 417(e), Dec. 20, 2006, 120 Stat. 2966, as amended by Puspan. L. 110–172, § 11(a)(11)(B), Dec. 29, 2007, 121 Stat. 2485, provided that: “The amendments made by this section [amending this section] shall apply to sales or exchanges after the date of the enactment of this Act [Dec. 20, 2006].”

Effective Date of 2005 Amendment

Amendment by section 402(a)(3) of Puspan. L. 109–135 effective as if included in the provisions of the Energy Policy Act of 2005, Puspan. L. 109–58, to which it relates, but not applicable with respect to any transaction ordered in compliance with the Public Utility Holding Company Act of 1935 (15 U.S.C. 79 et seq.) before its repeal, see section 402(m) of Puspan. L. 109–135, set out as an Effective and Termination Dates of 2005 Amendments note under section 23 of this title.

Amendment by section 403(ee) of Puspan. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Puspan. L. 108–357, to which such amendment relates, see section 403(nn) of Puspan. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 2004 Amendment

Puspan. L. 108–357, title VIII, § 840(span), Oct. 22, 2004, 118 Stat. 1597, provided that: “The amendment made by this section [amending this section] shall apply to sales or exchanges after the date of the enactment of this Act [Oct. 22, 2004].”

Effective Date of 2003 Amendment

Puspan. L. 108–121, title I, § 101(span), Nov. 11, 2003, 117 Stat. 1336, provided that:

“(1)Effective date.—The amendments made by this section [amending this section] shall take effect as if included in the amendments made by section 312 of the Taxpayer Relief Act of 1997 [Puspan. L. 105–34].
“(2)Waiver of limitations.—If refund or credit of any overpayment of tax resulting from the amendments made by this section [amending this section] is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this Act [Nov. 11, 2003] by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.”

Effective Date of 2001 Amendment

Puspan. L. 107–16, title V, § 542(f), June 7, 2001, 115 Stat. 86, provided that:

“(1)In general.—Except as provided in paragraph (2), the amendments made by this section [enacting sections 1022 and 6716 of this title and amending this section and sections 170, 684, 1040, 1221, 1246, 1291, 1296, 4947, 6018, 6019, 6075, and 7701 of this title] shall apply to estates of decedents dying after December 31, 2009.
“(2)Transfers to nonresidents.—The amendments made by subsection (e)(1) [amending section 684 of this title] shall apply to transfers after December 31, 2009.
“(3)Section 4947.—The amendment made by subsection (e)(4) [amending section 4947 of this title] shall apply to deductions for taxable years beginning after December 31, 2009.”

Effective Date of 1998 Amendment

Amendment by Puspan. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Puspan. L. 105–34, to which such amendment relates, see section 6024 of Puspan. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Puspan. L. 105–34, title III, § 312(d), Aug. 5, 1997, 111 Stat. 841, as amended by Puspan. L. 105–206, title VI, § 6005(e)(3), July 22, 1998, 112 Stat. 806, provided that:

“(1)In general.—The amendments made by this section [amending this section and sections 25, 32, 56, 143, 163, 215, 280A, 464, 512, 1016, 1033, 1038, 1223, 1250, 1274, 6012, 6045, 6212, 6334, 6504, and 7872 of this title and repealing section 1034 of this title] shall apply to sales and exchanges after May 6, 1997.
“(2)Sales on or before date of enactment.—At the election of the taxpayer, the amendments made by this section shall not apply to any sale or exchange on or before the date of the enactment of this Act [Aug. 5, 1997].
“(3)Certain sales within 2 years after date of enactment.—Section 121 of the Internal Revenue Code of 1986 (as amended by this section) shall be applied without regard to subsection (c)(2)(B) thereof in the case of any sale or exchange of property during the 2-year period beginning on the date of the enactment of this Act if the taxpayer held such property on the date of the enactment of this Act and fails to meet the ownership and use requirements of subsection (a) thereof with respect to such property.
“(4)Binding contracts.—At the election of the taxpayer, the amendments made by this section shall not apply to a sale or exchange after the date of the enactment of this Act, if—
“(A) such sale or exchange is pursuant to a contract which was binding on such date, or
“(B) without regard to such amendments, gain would not be recognized under section 1034 of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act) on such sale or exchange by reason of a new residence acquired on or before such date or with respect to the acquisition of which by the taxpayer a binding contract was in effect on such date.
This paragraph shall not apply to any sale or exchange by an individual if the treatment provided by section 877(a)(1) of the Internal Revenue Code of 1986 applies to such individual.”

Effective Date of 1988 Amendment

Puspan. L. 100–647, title VI, § 6011(span), Nov. 10, 1988, 102 Stat. 3691, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to any sale or exchange after September 30, 1988, in taxable years ending after such date.”

Effective Date of 1981 Amendment

Puspan. L. 97–34, title I, § 123(span), Aug. 13, 1981, 95 Stat. 197, provided that: “The amendment made by this section [amending this section] shall apply to residences sold or exchanged after July 20, 1981.”

Effective Date of 1978 Amendment

Puspan. L. 95–600, title IV, § 404(d)(1), Nov. 6, 1978, 92 Stat. 2870, provided that: “The amendments made by this section [amending this section and sections 1033, 1034, 1038, 1250, and 6012 of this title] shall apply to sales or exchanges after July 26, 1978, in taxable years ending after such date.”

Effective Date of 1976 Amendment

Puspan. L. 94–455, title XIV, § 1404(span), Oct. 4, 1976, 90 Stat. 1733, provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1976.”

Effective Date

Puspan. L. 88–272, title II, § 206(c), Fespan. 26, 1964, 78 Stat. 40, provided that: “The amendments made by this section [enacting this section, redesignating former section 121 as 122, and amending sections 1033, 1034, and 6012 of this title] shall apply to dispositions after Dec. 31, 1963, in taxable years ending after such date.”

Sense of Congress Concerning Tax Treatment of Principal Residence of Members of Armed Forces While Away From Home on Active Duty

Puspan. L. 105–261, div. A, title X, § 1074, Oct. 17, 1998, 112 Stat. 2138, provided that: “It is the sense of Congress that a member of the Armed Forces should be treated for purposes of section 121 of the Internal Revenue Code of 1986 as using property as a principal residence during any continuous period that the member is serving on active duty for 180 days or more with the Armed Forces, but only if the member used the property as a principal residence for any period during or immediately before that period of active duty.”

Transitional Rule in Case of Sale or Exchange of Residence Before July 26, 1981

Puspan. L. 95–600, title IV, § 404(d)(2), Nov. 6, 1978, 92 Stat. 2870, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that: “In the case of a sale or exchange of a residence before July 26, 1981, a taxpayer who has attained age 65 on the date of such sale or exchange may elect to have section 121 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applied by substituting ‘8-year period’ for ‘5-year period’ and ‘5 years’ for ‘3 years’ in subsections (a), (d)(2), and (d)(5) of such section.”