New Capital Gains Laws Regarding Home Sales - Posted by Tom Brown

Posted by Dave T on November 03, 1998 at 17:37:31:

Would you please cite the bill that is the source for your information?

Without having seen the text of the bill, I believe that this law only clarifies the intent of the original language in the transition period following enactment of the original bill.

Originally, during the transition period, the taxpayer was to prorate the allowable deduction to the percentage of the two years the principal residence was owned and occupied prior to sale.

This led to confusion about whether the exclusion itself was prorated or the actual amount of capital gains subject to the exclusion should be prorated. Many professional tax preparers took the more conservative approach of pro-rating the amount of capital gains subject to the exclusion.

Congress only clarified that the more favorable approach of prorating the exclusion itself was the intended approach.

Since we are now a full two years after enactment of the original bill, I suspect that the clarification would only afect tax returns filed last year where the taxpayer elected the more conservative approach to the capital gains treatment.

I may change my opinion after I see the text of the bill.

New Capital Gains Laws Regarding Home Sales - Posted by Tom Brown

Posted by Tom Brown on November 03, 1998 at 15:16:12:

If you have lived in the property for 2 of the last 5 years you can deduct $250,000 of the profit if you are a single filer or $500,000 for a married couple filing jointly.

Congress has clarified the law as follows:

If you have lived in the property for 1 of the last 5 years you can deduct $125,000 for a single filer or $250,000 for a married couple filing jointly. This change is retroactive to 5/97 when the law took effect.