Tax Free Exclusion on Sale of Personal Residence Reduced

[wexeter]

There was a little known provision in the Housing and Economic Recovery Act of 2008 that modifies Section 121 of the Internal Revenue Code. The modification reduces the homeowners ability to take the tax free exclusion of up to $250,000 per taxpayer or $500,000 for a married couple filing a joint income tax return upon the sale of their primary residence if the primary residence was used as a rental property before it was used as a primary residence. The change will significantly reduce the number of homeowners that will convert their rental properties into their primary residence so that they can take advantage of the 121 exclusion. You can read the entire analysis of the changes to Section 121 here: http://www.exeter1031.com/article_ch...ction_121.aspx for complete details.

[OtisMozzetti]

Not only use as rental property is non-qualified use

It's not just use as a rental property...

The article cited also states that use, before the use as a main home, as a second home or vacation home or in business, is non-qualified use. The capital gain prorated for the time of non-qualified use is not to be eligible for exclusion under section 121.

[les grans]

Seems to me that *any* use *other than* as a principal residence of the taxpayer/owner is non-qualified use under this new provision, if the use is (1) after 12-31-08 and (2) before a period of use as a principal residence...

[solomon]

There was a little known provision in the Housing and Economic Recovery Act of 2008 that modifies Section 121 of the Internal Revenue Code. The modification reduces the homeowners ability to take the tax free exclusion of up to $250,000 per taxpayer or $500,000 for a married couple filing a joint income tax return upon the sale of their primary residence if the primary residence was used as a rental property before it was used as a primary residence. The change will significantly reduce the number of homeowners that will convert their rental properties into their primary residence so that they can take advantage of the 121 exclusion. You can read the entire analysis of the changes to Section 121 here: http://www.exeter1031.com/article_ch...ction_121.aspx for complete details.

I have seen this post on more than one board. Why don't you advertise someplace else. We can read and digest the law without reading your advertising.

[Gene V]

I have a client that change his rental property back to his residence about three years ago, the property was originally his resident, then rental property for 20 years, now back to resident.
The way I understand the new law is: as long as he keeps using the property as his resident after Dec.31, 2008, all of the property will qualified as sec.121 property when he sells the property.
Does this sound correct?

[Gene V]

I have seen this post on more than one board. Why don't you advertise someplace else. We can read and digest the law without reading your advertising.

Wexeter has been very helpful in the pass on 1031 exchanges, don’t send him away.

[solomon]

I have a client that change his rental property back to his residence about three years ago, the property was originally his resident, then rental property for 20 years, now back to resident.
I way I understand the new law is: as long as he keeps using the property as his resident after Dec.31, 2008, all of the property will qualified as sec.121 property when he sells the property.
Does this sound correct?

That too is how I read the law.

[solomon]

Wexeter has been very helpful is the pass on 1031 exchanges, don’t send him away.

I am not disputing his 1031 savvy - just the advertising on the tax boards.

[wexeter]

Yep, Any Use Is Correct

Hi Les,

Yes, you are correct. Any use BEFORE use as a primary residence.

[wexeter]

Yes, That is Correct

Yes, that is correct. Any non-qualified use before 01/01/2009 is ignored.

[wexeter]

Mr. Solomon

I have been criticized by a number of boards in the past for my long winded technical posts and have been asked to post a summary with a link to a technical article rather than a long winded post on their boards. And, trying to get the formatting correct with each and every board takes time, so linking to an article that I only have to write once is far more efficient.

This is also a very important change that affects a lot of real estate investors. This change will substantially affect their prior planning. So, it is important to get the technical information out to as many people as possible in a format that is much easier to understand than the code. I post on many boards because not everyone reads each and every board, and I rarely post unless I think the information is critical.

[solomon]

I have been criticized by a number of boards in the past for my long winded technical posts and have been asked to post a summary with a link to a technical article rather than a long winded post on their boards. And, trying to get the formatting correct with each and every board takes time, so linking to an article that I only have to write once is far more efficient.

This is also a very important change that affects a lot of real estate investors. This change will substantially affect their prior planning. So, it is important to get the technical information out to as many people as possible in a format that is much easier to understand than the code. I post on many boards because not everyone reads each and every board, and I rarely post unless I think the information is critical.

As my German Professor of many decades ago would have said, "sehr gut." I think I remember the spelling.

[Snaggletooth]

Dialogue

Mr. Exeter in the past has engaged in dialogue with us. It is to his credit that he is an authority on 1031 exchanges.

Having read some of his prior helpful posts, I not only support him, but hope he will continue to visit. However, this initial post did resemble a couple earlier this week where there was clearly no other purpose other than to advertise for services and financial products.

[erchess]

Agree with Snags

I think it is great for people who have written articles about taxes to post here links to sites where their articles may be read for free and where no products nor services of / by the author are advertised. I think a link to an article is much superior to a long post and regulars here know that my posts can get on the long side.

I also think it would be great if this or some other web board would provide space for businesses who see tax professionals as among their potential customers could post short advertisements with such things as phone numbers, postal addresses, and links to further advertisements. We have the beginnings of that under Preferred Suppliers but the last I checked there was not a huge amount of information about each supplier and there were relatively few suppliers. I am thinking of more like a very specialized online yellow pages. But the point is that advertising should be handled in such a way that it does not intrude on those who are not interested.

[AuditorTurnedGood]

A bit of a rant...

Anyone noticed for as much as the Feds are trying to fix the housing and mortgage markets, as well as the economy as a whole, they seem to do an equal if not greater amount of shmucking it up? I'm still waiting for the legislation to help me buy a home - you know, a self employed accountant who makes a fair living but makes his taxable income as low as leagally possible? Sorry for the rant, I try to refrain, but sometimes, I really wonder. I found myself thinking "gee, it seems like the general American public needs a lobbying group in DC. Wait a second...." This housing bill is nothing more than pandering to get votes, Democrat, Republican, or otherwise.