Military Rental Property Sale

[amonEA]

I have a quick question about capital gains on the sale of a military personels rental property. We will call the couple BOB and Mary. Bob and Mary bought a house for their personal use in January 1991. They lived in the house until April 1993. When Mary received Military orders to transfer overseas. In May 1993 the couple rented the property out and kept it rented out until October 2003. In October 2003 they sold the home. The couple had been back in the United States for sometime before they sold the home. But had been stationed in a new city. In this new city they purchased another home and kept the old one rented. With this being the situation do they not have to pay capital gains on the sale of the property because they were in the military? However they would have to pay capital gains on the recapture of the depreciation taken over the last 10 years? Please advise?

Sincerely,
AMON

[BOB W]

The ........

....... answer to your question is on TTB 6-20. An extension of up to 10 years is available. But you should read the full text.

[amonEA]

Explanation

Hey Bob thanks for the reply. A friend of mine just recommended me to this website. He is a member as well. He also just recommended that i buy The Tax Book. In which I did, but could you or someone else explain to me in the mean time, until I receive the book what it says or give me a pub number that i can look up that maybe explains this a little better!

Thanks a lot,
Amon

[BOB W]

Hey Bob thanks for the reply. A friend of mine just recommended me to this website. He is a member as well. He also just recommended that i buy The Tax Book. In which I did, but could you or someone else explain to me in the mean time, until I receive the book what it says or give me a pub number that i can look up that maybe explains this a little better!

Thanks a lot,
Amon

Taxpayers may exclude gain on a home sale, provided they have owned and used the home as a principal residence for two of the five years before the sale. A reduced maximum exclusion may apply to those who satisfy part of the two-year rule. Military personnel often retain ownership of a home while away on duty, but eventually sell it without returning to live in it, perhaps failing the use test completely.

The new law allows persons on qualified extended duty in the U.S. Armed Services or the Foreign Service to suspend this five-year test period for up to 10 years of such duty time. A taxpayer is on qualified extended duty when at a duty station that is at least 50 miles from the residence sold, or when residing under orders in government housing, for more than 90 days, or for an indefinite period.

This change applies to home sales after May 6, 1997. A taxpayer may use this provision for only one property at a time and may exclude gain on only one home sale in any two-year period. Although an amended return must usually be filed within three years of the original return’s due date, the law gives qualifying taxpayers who sold a home before 2001 until Nov. 10, 2004, to file an amended return claiming the exclusion.

http://www.irs.gov/businesses/small/article/0,,id=118383,00.html

[OldJack]

Excellent post BobW.

[BOB W]

Gee....

.... thanks...................I got lucky.

[jainen]

overseas spies

>>persons on qualified extended duty in the U.S. Armed Services or the Foreign Service<<

The extensions act also added overseas spies! Although if I were a CIA agent, I'm not sure I would want to make a big deal about it in my local IRS office.

[Brian EA]

Statute of limitations

This change applies to home sales after May 6, 1997. A taxpayer may use this provision for only one property at a time and may exclude gain on only one home sale in any two-year period. Although an amended return must usually be filed within three years of the original return’s due date, the law gives qualifying taxpayers who sold a home before 2001 until Nov. 10, 2004, to file an amended return claiming the exclusion.

http://www.irs.gov/businesses/small/...118383,00.html

I was wondering if this transaction took place in 2002, would the statue of limitation expire or if there is any thing special for a member of the armed forces.

thanks

brian