MAT1040X wrote:

- quote -

The taxpayer won't fall under the safe harbor rule of
Regulation 1.121-3T(c)(2), since while that safe harbor
clearly allows for someone who is not employed to use the
exception if they take a new job somewhere else, it does not
provide for the reverse (someone currently employed stopping
work and then moving somewhere and not going to work there).

As well, the regulation contains the following definition of
"employment" at Regulation 1.121-3T(c)(3):

Employment. For purposes of this paragraph (c), employment
includes the commencement of employment with a new employer,
the continuation of employment with the same employer, and
the commencement or continuation of self-employment.

Since that definition appears to apply to the entire
"employment" related exceptions (not just the safe harbor),
it would appear that, by extension, this is not a change in
place of employment (note that in each case you do have to
*start* work, not *stop* work).

So that would require you to try and get under the test for
an unforeseen circumstance. Depending on your facts, the
safe harbor unforeseen circumstances at Regulation
1.121-3T(e)(2)(iii)(b) or (c) could apply:

---begin quoted text

(B) The cessation of employment as a result of which the
individual is eligible for unemployment compensation (as
defined in section 85(b));

(C) A change in employment or self-employment status that
results in the taxpayer's inability to pay housing costs and
reasonable basic living expenses for the taxpayer's
household (including amounts for food, clothing, medical
expenses, taxes, transportation, court-ordered payments, and
expenses reasonably necessary to the production of income,
but not for the maintenance of an affluent or luxurious
standard of living);

---end quoted text

The good news is this refers to a change of *status* rather
than a change in place of employment--so this retirement
would seem to fit. Note that these safe harbors indicate
that, for termination of employment, you are going to need
to show economic hardship rather than merely that he stopped
working. However, I suspect there's a decent chance you
might be able to pull off one or the other of these.

Alternatively, if the retirement is due to health reasons,
you always have either the health safe harbor *or* use that
to more fully develop a facts and circumstances exception
under either the health provision of the regulation or the
unforeseen circumstance exception.

--
Ed Zollars, CPA
Phoenix, Arizona

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"MAT1040X" <mat1040x[at]aol.com> wrote:

- quote -

Did he voluntarily retire or was he "voluntarily retired".

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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William P. Brown wrote:

- quote -

We're somewhat lucky that the first session is scheduled in
Roanoke rather than Virginia Beach, since that comes up next
week. My understanding, though, is that it could be mighty
wet in Roanoke today <grin> , but they are far enough inland
not to pick up the major brunt of the storm. Heck, last I
heard they were planning on going ahead with the Virginia
Tech/Texas A&M football game tonight--so I guess I'll get an
"upclose" look at the weather if I watch ESPN <grin> .

As I said in the other reply, I know I will be doing a
technology presentation in Virgina Beach on November 20 &
21--just don't know if I'm doing the home sale one or not.

--
Ed Zollars, CPA
Phoenix, Arizona

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Ron wrote:

- quote -

Well, I know I'll be in Virginia Beach on November 19 and
20--the only issue is whether I do the house presentation
<grin> . I'm doing it in Roanoke as a "last minute fill in"
in addition to the presentation I was scheduled to do on a
Technology Update for CPAs because a speaker canceled. The
conference is the Virginia Accounting and Auditing
Conference and is held twice--once in Roanoke in late
September and then in Norfolk/Virginia Beach in November.

I'm not sure right now if the speaker canceled for both
conferences or only for Roanoke. I know that since I
already had that topic "in the bag" for the Arizona Tax
Institute, I had told the sponsors in Virginia that I could
pinch hit if need be, since obviously I wasn't driving
straight home after I finished my sessions <grin> . I had
also figured out that by the time I finished my last
scheduled session, while I could leave Roanoke that night
the only thing I would accomplish is to be able to sleep
overnight in, as I recall, the Pittsburgh airport <grin> and
then arrive in Phoenix at virtually the same time as if I
left Roanoke the next morning.

--
Ed Zollars, CPA
Phoenix, Arizona

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Ron wrote:

- quote -

Sounds like a medical reason for early sale to me. Get your
son's doctor to write a letter to you confirming the facts
you've presented and recommending that your son, and the
rest of the family, move somewhere else.

Ed, I'd like to know when/if you're in Virginia Beach, too.
(BTW, tomorrow would not be a good day.)

Regards,
Bill
~~~~
Associate Professor of Accounting
Longwood University
Department of Accounting, Economics & Finance
http://www.longwood.edu/staff/wpbrown/
Opinions expressed by me are mine, not my employer's.

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One of the exceptions for selling a house held under two
years is "change in employment". Would this apply to
unexpected retirement where the person returned to home
state - but then wasn't employed any more?

Situation is: Company transferred client to east coast. He
was nearing retirement age, but was retired sooner than
expected. His house sale was two weeks short of being two
years. He moved back west where he was born and raised (not
where he was transferred from). Wonder if that meets the
criteria for a change in employment?

Mary Ann Thomas, EA in AZ

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"rick++" <rick303[at]hotmail.com> wrote:

- quote -

Umm the last time normal cap gain rates were 28% was in
1997......

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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Investments should be made on the basis of maximumizing
return rather than minimizing taxes. If you stretched the
transaction out, you may have spent more than the $9,000 CG
tax in increasing finance interest rates or the wood surtax
builders are adding to new houses (the price of wood has
nearly doubled this year). the reduction of CG tax from 28%
to 15% should have helped this decision.

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- quote -

Let me know when the Va Beach presentation is. My
unforeseen non-safe harbor circumstance is that we bought in
a non-jet noise area af VAB and with my autistic son, when
they fly over the house (as of the last 3 months) he goes
almost in seizures of fear. Now with the new F18E planes
coming that are 30% louder and I want to get as far away
from them as possible for the health and welfare of my
child. They were not like this when we bought the house.
Point may be moot anyway, with Isabel coming, the new house
may get delayed (or the current house may not come out
unscathed forcing a delay in everything.) The builder will
not delay closing so I can delay this home closing,
hopefully (and I hope there is no damage) if there is
damage, he can be persuaded either personally or legally.
Thanks for the response.

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Ron wrote:

- quote -

Distilling my comments from when this was posted on misc.taxes:

- quote -

Closing on the new home is irrelevant. It's when you SELL your
or move out of your OLD home that determines your eligibility
for the exclusinon.

- quote -

???

- quote -

It's "unforeseen", not "unforseeable", and I don't see
that you qualify. Regulations 1.121-3 and -3T describe
some circumstances which qualify and some which do not.

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Ron wrote:

- quote -

With the facts you have given and the actual explanation in
the regulations, I wouldn't be *so* sure. IRS Publications
are not the law and are not even binding on the IRS.

The law said other unforeseen circumstances as provided for
in regulations. Regulation 1.121-3T(e)(2) provides the
following list of specified "safe harbor" other unforeseen
circumstances:

--begin quoted text

- quote -

--end quoted text

From the facts you've given, you don't seem to meet any of
those tests. So that leaves you open to trying to claim a
"non-safe harbor" other unforeseen circumstance. While the
regulation isn't crystal clear, it appears that is possible
(the theory that you could ask for a formal ruling would
seem to indicate that other facts might work).

In that case, the IRS in the regulations notes they will
consider the following issues:

--begin quoted text

- quote -

--end quoted text

You may need to keep your eye out for any IRS rulings that
someone might obtain in a similar situation. It appears
that your "unforeseen circumstance" is that want to buy a
new residence and that the builder refuses to sell to you at
a point where more than 24 months will pass. I would feel
better if you had a case where you were initially told the
property would not be ready until after the 24 month period
passed, but due to circumstances beyond your control you now
have to take delivery and that will force you to sell your
current residence as you cannot afford to have two residences.

However, your statement that you will "no longer qualify"
suggests to me that the facts might be you are not currently
committed to buying, but you *want* to buy and the builder
will only sign off right now if you agree to take delivery
on a date that would be before the 24 months--and that is
your problem.

If those are the facts, this looks more like a
*discretionary* situation and I would doubt it would work.
That is, when you bought the new residence, it was clearly
"foreseeable" that it would force you to sell the old one
*AND* that it would do so before the 24 month period ran.
If that was allowed, then *anybody* that bought a new
residence in the 24 months would automatically
qualify--which would render the whole issue of having to
"qualify" for this exception superfluous in virtually every
case. That argues for a view that Congress enacted a
section that has no effect whatsoever, and I don't see a
court forcing the IRS to accept that view when the contrary
view seems to be both very reasonable *and* gives the
section some purpose.

- quote -

Most likely they will not ask, though they have a right to
do so.

I'm actually going to be doing a presentation on this topic
at conferences for CPAs at least twice in the next few
months (Roanoke, Virginia and Phoenix, Arizona are now "for
sure" and Virginia Beach, Virginia is a possibility <grin> ).

--
Ed Zollars, CPA
Phoenix, Arizona

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Tax question really if you have any advice or can point me
in the right direction (besides hiring a tax attorney).

We are selling our home for $60,000 more than we paid for it
22 months ago for a home we are building. The builder will
not move out the closing on the new home so I can be in this
home 24 months. With that, I do not meet the time test (24
months) to exclude my profit from capital gains. How can I
get out of paying it? If I pay it, my cash for the
downpayment is used and puts me out of qualification. Pub
523 from the IRS states I can qualify for a reduced
exclusion based upon

1. Moving for work more than 50 miles (Doesn't help me)
2. Health (Doesn't help me)
3. Unforeseeable circumstances which can help based upon
some broad terms. I think I can squeeze in there for
a number of reasons.

If I qualify for the exclusion or reduced exclusion, pub 523
states not to report the sale of the home on my taxes
meaning I do not have to state "why" I think I fit in the
exclusion terms. Will they come back and ask? Is there a
mechanism for them to automatically ask? Am I making a mound
out of a mole hill? Thanks for any advice!

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