What condition negates a seller's ability to exclude capital gains when selling their primary residence?

The correct condition that negates a seller's ability to exclude capital gains when selling their primary residence is the requirement to have lived in the property for at least two years. Under the Internal Revenue Code, to qualify for the capital gains tax exclusion on the sale of a primary residence, a homeowner must have used the property as their main home for at least two out of the last five years preceding the sale. This two-year residency requirement is critical because it ensures that the exclusion is available to individuals who have made the property their primary residence for a significant length of time, thereby stabilizing their housing situation and preventing speculative trading in real estate.

The other conditions mentioned, such as income levels or property ownership duration, do not relate directly to the residency requirement for the exclusion. Specifically, having an income over $100,000 does not automatically disqualify a seller from excluding capital gains, as the exclusion thresholds depend on other factors including filing status. Additionally, owning the property for less than five years only pertains to the timing of the sale in relation to the two-year residency requirement, and selling to a family member does not impact the exclusion eligibility if all other criteria are met. Hence, the necessity of residing in the property for two years is a foundational prerequisite