Counting freeloading relatives as a hardship? Not so fast, the IRS says

Los Angeles Times - Apr 27th, 2025

A homeowner who allowed her daughter to live rent-free in her home since 2008 is now facing the realization of a significant capital gains tax due to the house no longer being her primary residence. The IRS does not consider living arrangements as a hardship that could modify home sales exclusion rules, meaning she will be subject to taxes on the sale of her property. The situation highlights the complexities of family financial support and tax liabilities.

Another reader faces a different financial dilemma involving her late mother's estate. Despite being promised a share of a sizable inheritance, the reader's sister, who managed the mother's finances, claims ignorance about the whereabouts of the funds. This situation raises concerns about potential financial elder abuse or mismanagement. The reader is advised to seek clarity from her sister, though she is hesitant to involve legal counsel. These cases underscore the importance of clear financial planning and transparency within families.

Capital Gains Tax Estate Management Financial Elder Abuse Irs Regulations Family Financial Planning

Story submitted by Fairstory

RATING

7.0

Fair Story

Consider it well-founded

The article provides accurate and practical financial advice, particularly in relation to IRS rules on home sales and capital gains tax exclusions. It is clear and accessible, making complex financial topics understandable for a general audience. However, the story could benefit from increased source variety and transparency to enhance its credibility. While it addresses issues of public interest, its impact is primarily at the individual level, offering personal finance guidance rather than influencing broader policy or societal change. The potential for controversy is low, as the article focuses on factual advice rather than engaging in contentious debates.

Accuracy

The story provides accurate information regarding IRS rules on home sale capital gains exclusion and the lack of hardship provisions for freeloading relatives. The explanation of the $250,000/$500,000 exclusion and the requirement to live in the home for two of the past five years is consistent with IRS guidelines. The mention of a partial exclusion for certain hardships, like work-related moves, is also correct. However, the story's anecdotal elements, such as the estate management scenario, are not verifiable within the context of tax regulations, as they rely on personal accounts.

Balance

The story presents a balanced view of the tax implications related to home sales and personal finance issues. It offers multiple perspectives by addressing both tax regulations and practical financial advice. However, the narrative leans towards the perspective of individuals facing financial dilemmas without exploring broader systemic issues or alternative viewpoints, such as policy changes that could address these personal finance challenges.

Clarity

The language and structure of the article are clear and concise, making complex financial topics accessible to a general audience. The logical flow of addressing individual queries followed by expert advice aids comprehension. However, the use of anecdotal evidence without clear context can occasionally obscure the main points, particularly for readers unfamiliar with the specific financial situations discussed.

Source quality

The story primarily relies on the expertise of Liz Weston, a Certified Financial Planner, which provides a credible source for personal finance advice. However, the lack of direct citations or references to official IRS documentation or additional expert opinions limits the depth of source variety and authority. The narrative would benefit from incorporating more diverse sources to enhance reliability and impartiality.

Transparency

The story lacks explicit transparency regarding its sources and methodologies. While it provides sound financial advice, it does not disclose the basis for some claims, particularly those related to personal anecdotes. There is no clear explanation of how information was gathered or verified, which could impact the reader's ability to assess the impartiality and accuracy of the advice given.