Special Trivia Question for 1/27/2026 (Section 121 exclusion)

The Section 121 exclusion is usually all-or-nothing, and you don’t get a partial exclusion if you only qualify for one year out of the two-year ownership and use requirement.
However, the IRS defines some exceptions that will let you qualify for a partial exclusion. Which of these does NOT qualify for the partial exclusion?

A. Having four children over the course of ten years
B. Divorce or legal separation
C. Health-related move
D. Change in employment (over a minimum distance)
E. Unaffordability due to change in employment

Having four children over ten years isn’t a listed exception, but giving birth to multiple children in the same pregnancy is considered an “unforeseen circumstance” that would qualify.

Divorce or legal separation is also included as an “unforeseen circumstance.” You can qualify for a partial exclusion for a health-related move if relocation was necessary for medical treatment for yourself or a specified relative (your third cousin once removed doesn’t count). For Answer C). to count, the new employment location must be at least 50 miles farther away from your current home than your prior work site. Lastly, if you go on unemployment or can’t pay the home expenses because you lost your job, you may qualify for a partial exclusion.

Finally, there is an elastic cause at the end:
”Even if your situation doesn’t match any of the standard requirements described above, you still may qualify for an exception. You may qualify if you can demonstrate the primary reason for sale, based on facts and circumstances, is work related, health related, or unforeseeable.”

For the full list of situations that qualify for the partial exclusion, refer to IRS Publication 563.