LoTax wrote:

- quote -

It seems to me he'd have to own the place at the beginning
of the period and have taxable capital gain income from the
sale after year 5. I suppose he could acquire it in year 1,
life in it in years 1 and 2, and then sell it on an
installment sale. During years 3 through 5 he recognizes
installment sale income. And then at the end of year 5
"recognizes" the balance up to $250,000.

Stu

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"Ivan Erwin" <ierwin[at]myexcel.com> wrote

- quote -

You have to have owned it, and lived in it as your personal
residence, for two of the five years before the sale. This
allows for someone who moves and sells the house, say in a
year, with the house staying vacant the entire time.

--
Paul A. Thomas, CPA
Athens, Georgia

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"Ivan Erwin" <ierwin[at]myexcel.com> wrote:

- quote -

Media personal finance experts advice is worth what you paid
for it. This inexcusable comment is proof positive.

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

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- quote -

It is possible that you may have misunderstood her or she
may have been wrong. Whatever the case, essentially what you
have is a five year lookback period that begins on the date
of sale of the personal residence. Sometime during that
period you must have owned and lived in the residence. The
time periods for ownership and living are not required to be
simultaneous nor contiguous. You may not have used this
exclusion provison in the two years prior to the disposition
in question.

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Ivan Erwin wrote:

- quote -

No, it's not. Section 121(a) says,

"Gross income shall not include gain from the sale or
exchange of property if, during the 5-year period ending on
the date of the sale or exchange, such property has been
owned and used by the taxpayer as the taxpayer's principal
residence for periods aggregating 2 years or more."

Now, there is a new section 121(d)(10) that says,

"Property Acquired in Like-Kind Exchange — If a taxpayer
acquired property in an exchange to which section 1031
applied, subsection (a) shall not apply to the sale or
exchange of such property if it occurs during the 5-year
period beginning with the date of the acquisition of such
property."

This provision appears to mean that if property were
acquired in a 1031 exchange (which means it was not and was
not intended to be the buyer's residence at the time of the
acquisition), it really would have to be held for five years
before the exclusion from the sale of a principal residence
would apply.

Stu

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She's wrong. You have to have owned it and lived in it
during any two years of the five years prior to the sale.
The two years do not have to be continuous.

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- quote -

It's difficult to believe that that is what she said.
Correctly, "If you have lived in the home for 2 out of the 5
years preceding the sale, you then qualify for the
exclusion". Do you see the difference?? You may have owned
the home for only two years. As long as you owned and lived
in it for a period of two years, you would qualify for the
exclusion. There are those who have owned a home for five
years but who have lived in it for a lesser period of time.
In those cases, the taxpayer must have lived in the home for
a period of 2 (730 days) out of the 5 years preceding the
sale.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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- quote -

You may have missed part of the conversation. She was
probably referring to the change in tax law regarding the
sale of a main home that was acquired in a like-kind
exchange. In this specific instance you have to have owned
the home at least five years since acquiring it in a
like-kind exchange. It is effective for sales occurring on
or after 10/22/04. Other than that, the rule is two years
out of five years.

--
Alan
http://taxtopics.net

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Ivan Erwin wrote:

- quote -

Nope. You have to owned the residence for two of the
five years and lived in it for two of the five years --
and necessarily the same two years.

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"Ivan Erwin" <ierwin[at]myexcel.com> writes:

- quote -

Let's hope that you didn't hear the whole discussion. The 5
year rule applies to property acquired in a section 1031
exchange. (This is a recent change in the law.) For a
plain old vanilla purchase, it's 2 years.

Phil Marti
Clarksburg, MD

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Ivan Erwin wrote:

- quote -

There's now (the bill was signed into law by President Bush
two weeks ago) an additional requirement for excluding gain
from the sale of a principal residence, if the residence was
acquired by a tax-deferred exchange (IRC section 1031). If
that is the case, in addition to all the other requirements
in section 121, including the requirement that the taxpayer
must have owned and lived in the house for two years, there
is now also a five-year waiting period before the exclusion
of gain will be available. It is not a five-year
*ownership* requirement, and it is not a five-year
*occupancy* requirement, it is simply a requirement that
five years have passed subsequent to the acquisition of the
house, if the acquisition was a like-kind exchange. Some
"experts" have been describing this new wrinkle poorly, in
my opinion.

I haven't tried to figure out if the new provision in effect
amounts to a five-year ownership requirement, and it might
amount to that, in application, but the law isn't written
that way.

So, that said, I'll toss this out: is there a scenario in
which the taxpayer doesn't own his house for the entire
five-year period required by the new law but does qualify
for the exclusion at the end of that period? Reciprocal
gift...? Inheritance? Irrevocable Trust? Aah: Divorce
after adding a spouse to the deed!

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- quote -

No, it is not.

Helen, EA in PA
Director, NAEA; Immediate Past President, PSEA; Tax Expert, AOL
Enrolled Agents - THE Tax Professionals

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"Ivan Erwin" <ierwin[at]myexcel.com> wrote:

- quote -

I answered my own question with Publication 523 which, of
course, clearly states that the minimum ownership period is
two years.

Ivan

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I just saw/heard Grace Weinstein, "Personal Finance Expert."
on CNNfn say that you must have owned the residence for at
least five years as well as have to have lived in it for two
of those years to claim the exclusion.

I thought maybe she misspoke but she repeated it again very
specifically.

This is not true is it?

Everything that I've seen says you only have to have owned
it for two years!

(She did mention exceptions to the rule due to job loss,
etc. and to see a tax expert.)

Thanks, Ivan

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