Unusual section 121 exclusion

[JBP]

A client has been living for two years in a camper inside a pole building on land they own. They have sleeping and cooking facilities and an outhouse. There is electricity in the pole barn, but no water/well or sewer/septic. It is their only residence and both the camper and the land are paid off.

Pub 523 states: The exclusion can apply to many different types of housing facilities. A single-family home, a condominium, a cooperative apartment, a mobile home, and a houseboat each may be a main home and therefore qualify for the exclusion.

My client wants to sell the property and use the primary residence exclusion.

If the camper itself had toilet facilities (like an RV or houseboat) and was definitely staying on the property I'd be ok with it. (Whether the camper is part of the sale or not hasn't been determined.)

But as it is I'm uncomfortable -- because while it is truly their primary residence, it's not a set up that your average person would be able to live in. I'd like to hear perspectives from other tax pros. Thanks in advance.

[TaxGuyBill]

If the camper itself had toilet facilities (like an RV or houseboat) and was definitely staying on the property I'd be ok with it. (Whether the camper is part of the sale or not hasn't been determined.)

If the camper is not part of the sale, I don't see how he is selling his residence.

If the camper is part of the sale, I don't see anything that would disqualify it and wouldn't have a problem with an outhouse on the land.

[New York Enrolled Agent]

Not sure but Reg. 1.121-1(b) says residence does "not include personal property that is not a fixture under local law."

I think you need to check the status under local law. You might also want to read TCS 2014-80. It doesn't deal with section 121 but does deal with a taxpayer using the first-time homeowner provision in section 72(t). Don't know how close the facts align but the taxpayer did not prevail.

[TaxGuyBill]

"[/COLOR]not include personal property that is not a fixture under local law."[/COLOR]

I think it is interesting that it says that shortly after saying a houseboat could qualify (which seems to be personal property that is not a fixture, whether or not local law mentions it).

[BOB W]

if the camper is not part of the sale, i don't see how he is selling his residence.

If the camper is part of the sale, i don't see anything that would disqualify it and wouldn't have a problem with an outhouse on the land.

i agree!!!!!

[New York Enrolled Agent]

I think it is interesting that it says that shortly after saying a houseboat could qualify (which seems to be personal property that is not a fixture, whether or not local law mentions it).

TGB - I think the key is whether the houseboat is "affixed" based on state law. I'm pasting the NYS opinion on this. Some houseboats are personal property, others are real property - the classic tax answer - "it depends".

Volume 5 - Opinions of Counsel SBEA No. 27 (ny.gov)

[TaxGuyBill]

TGB - I think the key is whether the houseboat is "affixed" based on state law. I'm pasting the NYS opinion on this. Some houseboats are personal property, others are real property - the classic tax answer - "it depends".

Volume 5 - Opinions of Counsel SBEA No. 27 (ny.gov)

Thanks. My first thought it was weird to have a houseboat that is "affixed" to the land, but then I realized "mobile" homes and "trailer" homes rarely, if ever, move. I guess the world doesn't make sense to me. LOL.


Bill