Surviving Spouse Residence Sale in California

For sales or exchanges occurring after December 31, 2007, the IRS allows an exclusion of up to $500,000 on the sale of a principle residence by a surviving spouse who files as a single taxpayer if the sale occurs not later than 2 years after the spouse’s death, and the ownership and use tests are met.

However, California does no t conform to the Forgiveness Debt Relief Act of 2007. Instead, in order for the surviving spouse to be entitled to the $500,000 exclusion, the residence must be sold in the year the deceased spouse dies, and the surviving spouse qualifies.
This lack of California conformity presents additional hardships on surviving spouses especially in a depressed real estate market. Consult your tax advisor before making any changes.