sec 121 exclusion reduced amount

[sea-tax]

Hey folks I need a liitle help.

Situation is boyfriend and girlfirend sold a home used a primary res. Bougth in 12/04 and sold in 1/06. Did not meet the two year test, but did use it as primary home.

I have split the sales price and cost basis 50/50 betwen the two because both were listed as owners.
The girlfriend I am sure does not meet any of the reduced exclusion amounts. However the boyfriend might.

The story is the boyfriends father who did not live with them owns a farm and became ill. Clients state they sold home so that boyfriend could move closer to fathers home to help take care of dad and the farm.

Does this qualify for a reduced exclusion amount due to health of a qualified individual?TTB page 6-21

When I read it is sounds like the dad would have to have lived with them before the sale to be considered a qualified indiviual for health purposes which was not the case.
Any help or advice would be appreciated. I already told both clients that this maybe a long shot.

[sea-tax]

some more info. I just re-read the pub 523 and on page 16 it tells an example of "chase and lauren" a married couple who moved so that Lauren could take care of father.

Maybe in my case the same applies . BF moved to take care of father and both boyfriend and girlfirend moved into his home. I know girlfriend still has no exclusion but based on this example it sounds like Boyfriend might.

What do ya all think?

[veritas]

I think you have

a reasonable case.

It appears the IRS does not want to tax gain on the sale of residence if there is any good reason whatsoever. Which seems odd to me. I think somebody on top (congress?) said don't tax this IRS or else.

It may take a Private letter ruling to establish your exception.

[sea-tax]

Thanks Veritas! I dont want to go through a Private letter ruling.

Based on what I read I think the boyfriend does qualify for the health reasons of reduced sec 121.

Does anyone else have an opinion.

[jainen]

For several years

>>the IRS does not want to tax gain on the sale of residence if there is any good reason whatsoever<<

For several years now the mood in Congress has been to eliminate taxes on ALL capital gains. Since that primarily benefits the rich, they have to move slowly. Next year they will eliminate CG tax for low income folks, and they seem to encourage the middle class to buy into this concept as much as possible with their homes.

I'm sure the courts will soon rule that "unforeseen circumstances" is a ridiculous standard, and anyone can claim a reduced exclusion for any reason based simply on time.

[veritas]

Thanks Veritas! I dont want to go through a Private letter ruling.

Based on what I read I think the boyfriend does qualify for the health reasons of reduced sec 121.

Does anyone else have an opinion.

It seems to me you have a good case to exclude the gain for the girlfriend. Her "partner" is leaving what is she to do? She can't afford the house payment and must also sell.

[JCH]

Hey folks I need a liitle help.

Situation is boyfriend and girlfirend sold a home used a primary res. Bougth in 12/04 and sold in 1/06. Did not meet the two year test, but did use it as primary home.

I have split the sales price and cost basis 50/50 betwen the two because both were listed as owners.
The girlfriend I am sure does not meet any of the reduced exclusion amounts. However the boyfriend might.

The story is the boyfriends father who did not live with them owns a farm and became ill. Clients state they sold home so that boyfriend could move closer to fathers home to help take care of dad and the farm.

Does this qualify for a reduced exclusion amount due to health of a qualified individual?TTB page 6-21

When I read it is sounds like the dad would have to have lived with them before the sale to be considered a qualified indiviual for health purposes which was not the case.
Any help or advice would be appreciated. I already told both clients that this maybe a long shot.

The boyfriend clearly qualifies for the reduced exclusion under Reg. 1.121-3(f). The girlfriend probably wouldn't qualify under the Unforeseen Circumstances Safe Harbor, but may qualify under the Facts and Circumstances Reg. 1.121-3(b). I'd certainly give it a shot if she were one of my clients. Everytime I've encountered Sec. 121 issues, I'm always amazed that almost everyone qualifies for some sort of exclusion, if not the full exclusion of gain.

[sea-tax]

Thanks to all I really appreciate the work you all put in to your reposnes. I have advised clients of my opinions and the ideas that you all have presented.


I left the decision up to them. They also agree that the gf does not qualify but are going to think about the bf. I told them that I would feel confortable with the bf taking the exclusion but that in an audit it may take some convincing to get the auditor to see it are way. I feel like I have given them the options and it is up to them how they wish to report it.

Anyhow thanks again .