- quote -

that in this particular instance that there was nothing from
the original poster to indicate anything with regards to
intent other than what he has done and that he wants to sell
now or in the near future.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU wrote:

- quote -

Take a look at the language in 1.121-3(b) and the preamble
to the final regulations--if you meet a safe harbor, you are
in. Period. if you fail to meet the safe harbor, then you
must meet the "principal reason" test.

As well, the construction of 1.121-3(c)(2) supports this,
especially when read in combination with 1.121-3(b). If you
meet the distance test, your sale is *DEEMED* to be "by
reason of a change in place of employment" per (c)(1). And
Section 121 itself requires only that the sale meet that
test--if it is "by reason" of a change of employment, you've
met the test.

--
Ed Zollars, CPA
Phoenix, Arizona

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:
- quote -

Ed, if you read the final regulation very carefully the
specific wording is such: Under subparagraph (c)(2), it
says: Distance safe harbor. A sale or exchange is deemed to
be by reason of a change in place of employment (within the
meaning of paragraph (c)(1) of this section) if--

So now we need to look to (c)(1) to determine that meaning:
Sale or exchange by reason of a change in place of
employment--(1) In general. A sale or exchange is by reason
of a change in place of employment if, in the case of a
qualified individual described in paragraph (f) of this
section, the primary reason for the sale or exchange is a
change in the location of the individual's employment.

So in determining THIS safe harbor of the 50 mile
requirement, we still need to establish that the primary
reason for the sale was a change in the individual's
employment. Given that the original poster has merely
rented for two years, given no indication of a willingness
to sell until now, and is contemplating waiting up to
another year and a half before selling, I would argue that
the primary motivation to sell is not based on the change of
employment.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU <dwoods[at]woods-financial.com> wrote:

- quote -

That's OK -- so long as it was your primary residence for at
least any 730 days of the five years before sale, then the
Sec 121 exclusion applies.

It does not necesarily have to be your primary residence
during the two years (or three years) preceeding sale.

- quote -

But I like to think of myself as a reasonable person. So if
TP believed he had a good chance of returning to this house
within 2-3 years, and when that belief proved wrong, he
sold, then as a reasonable person, I would believe job
relocation was the cause of the sale.

Look, if all reasonable people all believed the same, we
wouldn't have poliics or religion, right? <1/2 g
- quote -

I used to work for a large company with many sites around he
country, and know many people who accepted a job relocation
with the explicit hope, even strong belief, they could
return to their original location within 2-3 years. Very
common. And in more than half the cases, quite correct.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Ed Zollars, CPA wrote:
- quote -

Thank you, Ed. That is the point I was trying to relate in
my response to Mr. Woods.

--
Alan
http://taxtopics.net

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A reasonible man might delay the selling of his house for
several years if he had some doubt that the new job (or the
new company) would last. I had a relative that moved from
California to the East Coast due to a job change. He kept
his house in California, and returned to it four years later
when his East Coast job dwindled out.

--
Don EA in Upstate NY

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David Woods, EA, ChFC, CLU wrote:

- quote -

Actually, that particular portion of the rules was the in
the *temporary* regulations on the partial exclusion for
those that did not meet a safe harbor--the IRS this week
finalized those and made a change that may be relevant here,
at least if the property is sold after August 13.

In the final regulations, if you meet a safe harbor
exception, then you do not have to show that it was the
principal reason for the sale. In this particular case, it
appears the taxpayer met the "50 mile" safe harbor for a
change of employment.

The final regulations, released on August 16, may be read at:

http://www.irs.ustreas.gov/pub/irs-regs/td_9152.pdf

--
Ed Zollars, CPA
Phoenix, Arizona

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[major snip]

- quote -

I didn't misinterpret a thing. When you prefer not to sell at a point in
time and choose to convert the home into a rental property it is no longer a
primary residence. If you maintain it as a rental property for a couple of
years with no effort or intent to sell (and no indication by the original
poster he intended anything BUT renting it), no reasonable person would
believe that a subsequent sale was a result of a change of employment.
That's NOT a safe harbor. Read your own post of the relevant regulation and
your own final piece of explanation. It and you say that the PRIMARY reason
for the sale or exchange is a change in the location of the individual's
employment. Moreover, if you look back at the original post, he was looking
to possibly hold as long as he can and maintain the possibility of a reduced
maximum exclusion before selling. CLEARLY the change of employment is not
the primary motivation to sell here. He's looking to wait as long as
possible for tax purposes only. That's fine when you have an outright
qualifying home sale, not when you're trying to meet a safe harbor or other
unforeseen circumstances.

If he had said he had difficulty in finding a buyer, hence the delay, I
would agree wholeheartedly. I've seen local examples such as Drew Bledsoe
selling to Curt Schilling after two years because the market of people
buying $10 million homes is rather small.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU wrote:
- quote -

I believe you have misinterpreted the final regulations. The
issue regarding proximate timing only comes into play when a safe
harbor does not exits. See 1.121-3(b). The regs list 6 factors
(not all inclusive) that are considered when determining the
primary reason for the sale when there is no safe harbor.
Therefore, one must look to the definition of a safe harbor. Here
is the regulation defining the employment safe harbor (1.123-3(c))

Begin Text *************
(c) Sale or exchange by reason of a change in place of employment—
(1) In general. A sale or exchange is by reason of a change in
place of employment if, in the case of a qualified individual
described in paragraph (f) of this section, the primary reason
for the sale or exchange is a change in the location of the
individual’s employment.
(2) Distance safe harbor. A sale or exchange is deemed to be by
reason of a change in place of employment (within the meaning of
paragraph (c)(1) of this section) if— (i) The change in place of
employment occurs during the period of the taxpayer’s ownership
and use of the property as the taxpayer’s principal residence;
and (ii) The qualified individual’s new place of employment is at
least 50 miles farther from the residence sold or exchanged than
was the former place of employment, or, if there was no former
place of employment, the distance between the qualified
individual’s new place of employment and the residence sold or
exchanged is at least 50 miles.
(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.
(4) Examples

End Text **********************

There is no mention of proximate time in the definition of the
safe harbor. It merely requires that the primary reason is the
change of employment location that conforms to the distance test
and the change in location occurs when the individual is the
owner and resident of the home as his principal residence.

I can think of many reasons why someone would not necessarily
want to sell a home at a specific point in time and prefers to
wait. I see no reason why a home would have to remain empty
during this period. Depending on the facts and circumstances,
the individual may have to provide evidence to the IRS that the
delay in the sale was reasonable and that the change in location
was still the primary reason.
--

Alan
http://taxtopics.net

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- quote -

Actually took a look at the now final regulations on the
reduced maximum exclusion on a home sale, and the
regulations were quite clear that the sale and the
circumstances giving rise to the sale were proximate in
time. Sorry, this amount of time after the change in
employment is not a proximate time frame. Even if sold now,
It will have been rented for nearly 2 years. Besides its
clear to me that the decision to turn the home into a rental
property was a conscious decision to do it for its own sake
and had little to do with inability to sell. As I
understand it, real estate is quite hot in California.

See Reg. 1.121-3T (b) (1). It's actually quite specific in
its wording on time frame.

If the taxpayer does not qualify for a safe harbor, factors
that may be relevant in determining the taxpayer's primary
reason for the sale or exchange include (but are not limited
to) the extent to which--

*****(1) The sale or exchange and the circumstances giving
rise to the*sale or exchange are proximate in time;

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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"Arthur Kamlet" <kamlet[at]panix.com> wrote:
- quote -

3 1/2 years isn't a while, it's a very long time for this
purpose. We'll agree to disagree here.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU <dwoods[at]woods-financial.com> wrote:
- quote -

That;s not my reading.

Besides, I'd argue if I hadn't had to move due to a job
change I'd still be living there today. Nothing required
me to sell before moving or within any fixed time of my move
for the job change.

And if selling it would cause a problem in a depresed
economy, so I rented it out for a while.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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- quote -

Had you sold the CA house upon moving to KS you would have
qualified for the exemption under one of the exceptions to
the 2 year out of 5 rule.

Converting it to a rental for the period of thime that you
will be renting it prevents any exclusion when you sell the
house based upon your scenario.

Bruce Raskin, CPA
Small Business and Individual Tax and Accounting Services

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"TaxAverse" <mdscales[at]yahoo.com> wrote:

- quote -

I would say no reduced exclusion. You aren't selling the
property because of a change in employment. Heck, you
aren't even selling the property when you changed
employment. It's not even reasonably close to your move out
date that you could claim exigent circumstances delaying a
sale. You can't say well I had to move because of my job,
but I rented it for 3 1/2 years before I HAD to sell because
of the move.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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TaxAverse wrote:

- quote -

My interpretation of the temporary regs tells me that as
long as you were using the home as your main home at the
time you had a qualified change in employment, you meet the
safe harbor definition and are entitled to a reduced maximum
exclusion. Using your dates as an example, your ratio is 75%
(18 months over 24 months). Your reduced maximum exclusion
becomes $187,500 assuming you are single. You would use the
worksheets in Pub 523 to compute your potential realized
gain and the amount of the gain attributable to the
depreciation for the period 4/04 thru 10/07. The amount
attributable to the depreciation may not be excluded. The
$187,500 could be used to offset the remaining gain.

--
Alan
http://taxtopics.net

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(I appreciate your help in advance!)
I've searched and searched for an answer to my question, but
all the examples I found seem to fall short in one area or
another. Therefore I'm unclear as to whether I qualify for
the reduced capital gains exclusion on the sale of my home.

Here is my scenario...
- Owned and occupied home in CA from 10/2002 to 3/2004
(approx 18 mo.)
- Changed jobs and moved to KS in 3/2004.
- Purchased new home in KS in 3/2004.
- Began renting CA home as investment property in 4/2004.
- Plan on selling the CA home before 10/2007 (less than
5 years from purchase)

Do I qualify for reduced exclusion based on change of
employment because I lived in the CA home when the change of
employment took place? Or do I not meet the requirements
based on the rental income and the lack of satisfying the 2
year use test?

From what I understand I would be eligible for an exclusion
if I first lived in the home for 2 full years before turning
it into a rental property. So it makes sense to me that the
same would apply if I fell short of that based on employment
change. Some of what I've read leads to believe differently
though. I'm very unclear about this rule.

I appreciate any feedback you could give me.

Thanks.

-Mike

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