Which of the following scenarios does not qualify for a reduced exclusion under Section 121?

Section 121 of the Internal Revenue Code provides exclusions for capital gains from the sale of a primary residence, but certain circumstances can affect the amount of exclusion. Specifically, this section allows for a full exclusion of up to $250,000 ($500,000 for married couples filing jointly) if the homeowner has owned and used the property as a principal residence for at least two years out of the last five years before the sale.

In the context of job changes, the law provides specific allowances for reductions in the ownership and use periods in cases of a change in employment that requires a move. If a taxpayer sells their home due to a job change and relocates to a new area—typically defined as more than 50 miles away—they can qualify for a reduced exclusion. However, if the job change only results in a move within the same town, that scenario does not meet the criteria for a job-related hardship that would allow for a reduced exclusion. This is because the intent of the rule is to assist those who must relocate significantly for employment reasons, not just those making a minor geographic shift.

In contrast, circumstances surrounding divorce, federally declared disasters, and the death of the owner may provide avenues for taxpayers to qualify for a reduced exclusion under Section