A mother buys a house in her own name and her adult son lives in it as his home; she lives elsewhere. She sells it 20 months later. Can she use the bright-line main home exclusion?
Correct Answer
A) No; the exclusion does not apply when only a family member used it as a home.
Inland Revenue states that the main home exclusion will not apply when only a family member and not the owner has used the property as their main home. The mother owns the house but lives elsewhere, so the sale within 2 years is taxable under the bright-line test. Trusts have separate rules based on beneficiaries and the principal settlor.
Why This Is the Correct Answer
The owner must use the property as her own main home, and here only her son did.
Why the Other Options Are Wrong
Option B: Yes; the exclusion extends to any close relative who lives in the property.
Inland Revenue says the exclusion does not apply when only a family member, and not the owner, used the property as their main home.
Option C: Yes, provided her son lived there for more than half of the bright-line period.
The son's occupation does not count; the owner must use it as her own main home.
Option D: No, because a parent can claim the exclusion only once in her lifetime.
There is no once-in-a-lifetime rule; the exclusion fails here because she never lived there.
Background Knowledge for Finance
Source: https://www.ird.govt.nz/property/buying-and-selling/when-you-need-to-pay/the-brightline-test/exclusions-to-the-brightline-test
Exam Tip for Finance
For individual owners, the main home must be the owner's own main home.
Common Mistakes to Avoid on Finance Questions
- •Assuming a family member's occupation qualifies the owner for the exclusion.
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