"Michael T Wing CPA" <mtwingcpa[at]yahoo.com> wrote:
- quote -

My initial position wasn't that such positions were
absolutely assured to prevail but that there was enough
"wiggle room" created to take a position that a particular
set of of "unforeseen circumstances" might qualify. The
groups position at that time was that if no regs/cases/etc
were issued lending clarity to what "unforeseen
circumstances" would encompass, NO partial exclusion should
be taken. My position was that if the taxpayer knew the
possible exposure to losing the argument, and if such
argument on its face was not frivolous ( I decided I didn't
like the hardware on the bathroom cabinets..) the
taxpayer/preparer was free to take an agressive stance as to
whether a particular argument might be accepted.

Mike Lewis, CPA

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Mike Lewis <jmpj[at]cableone.net> wrote:

- quote -

Actually, the IRS issued regulations on this (and related
"residence" issues) just about one year ago. These
regulations did, in fact, create a list of safe harbor
situations, and further specified that other situations
could be considered on a "facts and circumstances" basis.

However, conspicuously absent from the safe harbor list were
any issues that dealt with the "normal" risks of home
ownership, such as declining prices, adverse zoning changes,
obnoxious neighbors, exorbitant tax increases, etc., etc.
So, I think it very much remains to be seen whether THOSE
kinds of situations will be accepted.

MTW

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Mike Lewis wrote:

- quote -

On December 24, 2002 a very important thing happened--the
IRS released Temporary Regulation 1.121-3T which implemented
the "other unforeseen circumstances" portion of the IRC
*AND* provided a broad "facts and circumstances" test, as
well as elective retroactive implementation of the provisions.

Back when this was last discussed there was no such
temporary regulation. Now, I suspected it wasn't *likely*
the IRS would play hardball on this matter, but it was also
clear that *if* they did go that route they would carry the
day in court. So taking an aggressive position was somewhat
a gamble that the politics wouldn't change before the issue
arose.

Note that with *current* commissioner, I'm not quite so sure
the IRS won't be playing hardball on such issues in the
future. Our new commissioner is much more of an enforcement
type than the prior "customer service" commissioner. But
those temporary regulations gave a retroactive "get out of
jail free" card to positions taken on prior returns.

--
Ed Zollars, CPA
Phoenix, Arizona

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A couple of years ago (or longer), I expressed a position
that the "unforeseen circumstances" clause of the rules
permitting partial exclusion of the gain on a home which had
NOT met the full 2 year ownership/residence rule under IRC
121 could be used as a very broad exception since
"unforeseen circumstances" was yet undefined. My initial
position on this topic was prompted first by a CPE seminar I
attend each year sponsored by the Texas Extension Education
Foundation, Inc (Tax Practitioner
Workshop..www.taxworkshop.com).

Today I finished another such two-day seminar. The same
instructor (Richard Griffith, CPA) covered the same topic.
He spent 29 years with the IRS, the last 12 in appeals, and
is now in public practice as well as still affiliated with
the Foundation.

His stance on this topic is the same. I told him that when I
had stated on this newsgroup that the "unforeseen
circumstances" permitted a loose interpretation that
everyone on the group had disagreed (in a very constructive
manner I might add), he responded by saying I should bring
the topic up again and ask everyone to review all the
actions over the last 2 or three years on this matter. In
his opinion, there are now several more "specific safe
harbors" and there will be more as practitioners use new
"unforeseen circumstances". In his view, the exception "an
event determined by IRS to be an unforeseen circumstance"
does not restrict us from taking a more liberal view on
whether a sale not meeting the 2 year period might qualify
for a pro-rated exclusion. It simply makes it a potential
difference of opinion with the IRS auditor, and will
ultimately be determined on the specific facts and
circumstances.

I agree there should be a compelling argument that the sale
was unexpected due to a specific set of circumstances
preventing the taxpayer from postponing the sale to the full
2/5 year rules. However, I don't agree that we must wait
until this specific set of circumstances appears on a
settled case, reg, etc....It will be these cases that will
broaden the "safe harbor" items.

Well, I didn't write this to be argumentative. I am just
encouraging everyone to revisit their earlier position.
Developments since our last discussion may make some want to
reassess their positions.

Happy holidays to you all!!

Mike Lewis, CPA

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