2 Yr personal exemption tax question - Posted by John(NH)

Posted by John(NH) on April 12, 1999 at 21:31:22:

I was asking the question in order to determine if I could plan a strategy. I believe Rosie provided some information which I found useful. Thanks though.

2 Yr personal exemption tax question - Posted by John(NH)

Posted by John(NH) on April 12, 1999 at 10:55:29:

We know the new tax law allows up to a $250,000 personal exemption if you lived in the home at least 2 of the last 5 years. What if I live there for 1 year? Am I allowed a $125,000 personal exemption? What about 6 months? 3 months? Is there a minimum term or amount allowed? I have a rental townhouse I was condering selling on a 1031 exchange. However, it would be easier for me to live there for 6 months or so and get the exemption. However if the minimum length for the exemption is 2 years I would opt for something else… Does anyone else use this strategy?

Re: 2 Yr personal exemption tax question - Posted by John Butler(Stl)

Posted by John Butler(Stl) on April 14, 1999 at 15:27:39:

Be aware that you have to recapture your depreciation even if you moved in. The capital gain could be tax free, but the recaptured depreciation from your prior years is taxed at 25% I think.

Check with your tax advisor to make sure,

John

Re: 2 Yr personal exemption tax question - Posted by Dave T

Posted by Dave T on April 12, 1999 at 20:47:15:

You must own and live in the property as your principle residence for two of the five years prior to sale to qualify for the capital gains exclusion.

Your strategy for getting a partial exclusion does not meet the hardship criteria specified in the current IRS regs.

An excerpt - Posted by Rosie(CA)

Posted by Rosie(CA) on April 12, 1999 at 17:54:45:

Here’s an excerpt from some pages my Realtor gave me regarding partial exclusion.

"Partial Exclusion Rules
Taxpayers who do not meet the 2-year ownership and use test of Section 121, or use the Section 121 exclusion more than once in a 2-year period, may qualify for a partial exclusion.
Partial exclusion rules apply when one of the following is true:

  1. Home Sales Before August 5,1999-Taxpayers (or spouse if filing a joint return) that owned a home on August 5, 1997 and sell the home for any reason before August 5,1999.
  2. Job Relocation or Health Reasons-Taxpayers that sell a home due to a job relocation, health reasons, or other ‘unforeseen circumstances.’"

Don’t know if this is straight from the IRS. I tried to find info on IRS site but gave up after a while.

Hope it gives you a starting point for research.
Rosie

Re: 2 Yr personal exemption tax question - Posted by JHyre in Ohio

Posted by JHyre in Ohio on April 12, 1999 at 13:57:39:

If you do not meet the 2-year requirement, you may prorate the exclusion IF you failed to meet the 2-year test because of:

change in place of employment, health problems or undefined “unforseen circumstances” to be clarified in future regulations. Proration is based on time in the residence, so if you meet above criteria and occupied the house for one year, you would get half of the exclusion ($125k if single, $250 if married).

John Hyre

Re: 2 Yr personal exemption tax question - Posted by ScottE

Posted by ScottE on April 12, 1999 at 11:26:48:

John,
It is my understanding that you may be entitled to a partial exemption based on the time you spent in the home. (Perhaps others can quote the exact language/code according to the IRS).
Please keep in mind I am not a CPA or Attorney and you might be well served to enlist their professional services. (JPiper, how’s that for a disclaimer?!)

Good luck!

Scott