On 16/4/04 16:09, in article zGSfc.670$L31.382@nwrddc01.gnilink.net, Howdy
wrote:
> Im a little unclear regarding exclusion allowable for gain on sales of main
> home, and hoping you can help me answer some of the questions below.
>
> My parents are in the process of selling their main home, and they would be
> qualified to exclude their gain up to $250K each for the sales based on the
> ownership and use tests. However, they will not buying another home.
>
> 1) Will they still be eligible to exclude the gain with no plan of
> buying a different home to live in?
Yes. Dont be confused by old sec. 121. No need to buy a new one.
> 2) What is the 3 years period regarding whether to exclude your gain
> or not?
I dont understand this question. There is no option involved: you are
either eligible to exclude or not. See Pub 523 and the other references I
included in another reply.
http://www.irs.gov/publications/p523/index.html
http://www.irs.gov/taxtopics/tc701.html
(There are various special rules for overseas workers, USG employees and
military, etc. I dont imagine you are referring to those.)
> 3) Once you claimed the exclusion, is there any reason you would be
> required to pay taxes on that gain at a later time?
Not if you were entitled to the exclusion in the first place. But I could
hypothesize: say you were not an owner, but rather the spouse of the owner,
so you took $500,000 exemption as a couple. Then it was found that the
marriage was invalid because your spouse was a bigamist. After the 3- or
6-year limitation (in the absence of out-and-out fraud) the IRS is SOL
though.
> 2) What is the different between this exclusion vs. gain
> postponement?
A sec. 1031 tax-free exchange is for income producing property. Sec. 121 is
for a main residence.
> Thank you very much for all your help.
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Posted: 2004-04-16 18:07:17
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