SECTION 121 · CAPITAL-GAINS BRIEF · CONFIRMED 2026-04-28

$0 federal capital-gains tax.

At Velocity, Strategic, and Aggressive · at every tier we discussed. Both gates of the §121 two-part test pass. Confirmed by Jessica 4/28 AM. The 7-day post-signing version becomes the CPA-ready brief.

FEDERAL TAX OWED
$0
At every pricing tier
OWNERSHIP
✓ 3 yr 22 d
Since 4/6/2023 cash · need 24 mo
PRIMARY-USE
✓ CONFIRMED
Jessica 4/28 AM · need 24 mo
MFJ EXCLUSION
$500K
Available · once every 2 years

SECTION 01 · WHAT §121 SAYS

One paragraph. Two gates. $500,000 of gain excluded.

If you owned and used the property as your primary residence for at least 24 of the last 60 months ending on the date of sale, you exclude up to $500,000 of gain (married filing jointly) from federal capital-gains tax. This is IRC §121. It applies to the residence, not the seller. It can be used once every two years.

SECTION 02 · THE TWO-GATE TEST

Both gates pass. The math is locked.

GATE 01 · OWNERSHIP
✓ SATISFIED

Owned the property for at least 24 of the last 60 months ending on the date of sale.
4/6/2023 → today = 36 months. 24 needed. Test passes automatically on the ownership side.

GATE 02 · USE AS PRIMARY
✓ CONFIRMED

Used the property as primary residence for at least 24 of the last 60 months.
Jessica confirmed 4/28 AM: primary residence since the 2023 purchase. Use test passes.

SECTION 03 · MATH AT EVERY PRICING TIER

Sale price minus basis minus improvements minus selling. §121 absorbs the gain.

Original basis is the $318,750 cash purchase from Opendoor on 4/6/2023. Capitalized improvements add ~$48,500 to basis. Selling costs are 6% commission + 1.5% closing. The $500,000 MFJ exclusion absorbs the entire gain in every scenario.

Velocity
$375,000
Sale price$375,000
Less basis−$318,750
Less improvements−$48,500
Less selling 7.5%−$28,125
PRE-§121 GAIN−$20,375
FEDERAL TAX$0
Strategic
$389,000
Sale price$389,000
Less basis−$318,750
Less improvements−$48,500
Less selling 7.5%−$29,175
PRE-§121 GAIN−$7,425
FEDERAL TAX$0
Aggressive
$399,000
Sale price$399,000
Less basis−$318,750
Less improvements−$48,500
Less selling 7.5%−$29,925
PRE-§121 GAIN$1,825
FEDERAL TAX$0

SECTION 04 · CAPITALIZED IMPROVEMENTS · BASIS BUILDERS

$48,500 of capitalized improvements.

Per IRS Publication 523, capital improvements add to your cost basis dollar-for-dollar and reduce taxable gain. The estimate below is across three eras. The 7-day post-signing brief uses your actual receipts where available; reasonable reconstruction is permitted under Pub 523 where receipts are partial.

EraItemEstimate
2023New HVAC system$8,000
2023Pool pump replacement$1,200
2023Roof refinish (full)$4,500
2023Stainless-steel appliance package$4,000
2023Detached AC casita built (13.5 × 14.5)$12,000
2024Springwell salt-free water softener (owned)$1,500
2024Hot-water carport faucet · bike + dog wash$300
2026Interior + exterior paint, full$5,000
2026LVP flooring throughout$7,500
20264th-bedroom barn-door conversion$2,500
2026Roll-down patio shades$800
2026Upgraded lights and fans + wall sconces$1,200
Total capitalized 2023 · 2026~$48,500
WHAT DOES NOT COUNT
  • Routine repairs (filter changes, paint touch-ups, fixing a window) do not capitalize.
  • Personal property (furniture) sold with the home does not reduce gain. Furnished sale is a separate transaction line.
  • Real-estate commission and closing costs reduce the gain through the selling-costs line, not by adjusting basis.

SECTION 05 · WHAT HAPPENS POST-SIGNING

CPA-ready brief in 7 days.

  1. Within 7 days of signing, I prepare a written §121 brief tailored to your actual occupancy facts and improvement receipts.
  2. The brief is structured to hand directly to your CPA.
  3. Your CPA verifies the math (I am not preparing your tax return).
  4. The verified brief becomes part of your closing file.

That protects you against an IRS look-back, lets you plan the proceeds distribution with full clarity on after-tax position, and gives you a clean line for your Colorado tax planning.

THIS IS
  • A tax-position estimate prepared by a real estate agent
  • The framework you walk into the closing table with
  • The starting math for your CPA
THIS IS NOT
  • A CPA-prepared tax return
  • A legal opinion
  • Advice on Arizona or Colorado state tax · those are separate questions

“I prepare the math. Your CPA verifies it. Both protect you.”

Tyler · April 28 walkthrough

SECTION 06 · REFERENCE LINKS

Sources for your CPA.