If the exclusion is taken, can it be retroactively removed by amending the past tax return?

For example, a couple sells a home with a $50k gain, and they take the exclusion so they pay no tax on that gain. It saves them maybe $5k-$10k on their tax bill, so a nice thing.

They own another home, and sell it the next year for a $500k gain. Boy are they lucky! But since it is only a year since they last took the exclusion, they can't use it now on this sale (there are no extenuating circumstances as listed in the Section 121 rules).

So now they have to pay income tax on the full $500k gain, which will cost them something like $150k in taxes.

So, can this couple amend the previous tax return and remove the Section 121 exclusion for their $50k gain, pay the resulting taxes (and penalties), and then use the Section 121 on their half-million gain so as to pay no taxes on it? That would save them around $125k in taxes.

And related, could the couple not take the Section 121 on the first home with the expectation of selling the second home, but if that sale does not happen could they amend the first tax return to claim it, thus getting a refund on that return?

Let's assume all the technicalities are met for both homes qualifying for the exclusion on their own, with the only issue being that it can only be taken once every 2 years.

That's a paid CPA question. Too much money at stake.

quote:

Originally posted by 220-9er:
That's a paid CPA question. Too much money at stake.

That is very good advice. My taxes started getting complicated a few years ago one of my better moves was to find a good CPA and ask questions .