Difficult "unforeseen circumstances"

#5 02-21-2005, 07:44 AM

"Thomas Healy" <tomhealycpa[at]earthlink.net> wrote:

- quote -

> Some of you have commented that there has been a fall-off in
> professional to professional discussion. Herewith my
> contribution to get it rolling:
> My client was negotiating for a new job in another state
> late in 2003 and into early 2004. They made several trips
> investigating the area and getting acquainted with the
> employer. In January 2004 a Realtor approached them out of
> the blue with a buyer who was willing to pay them $50,000
> more than they paid for their home 9 months previously. As
> part of getting ready for the new job, they took the offer,
> sold the home, and moved into an apartment.
> Two months later the negotiations broke down over benefits,
> and my client didn't take the job.
> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor. There is also the
> fact that they did profit from the transaction, which might
> a priori deny them the exclusion.
> What would you recommend, and why:
> 1. Take the exclusion, and have the client write a memo
> to his tax file putting the circumstances in the best
> light;
> 2. Don't take the exclusion now, but amend the return in a
> couple of years (hopefully some helpful PLRs or other
> guidance might show up in the meantime).
> 3. Apply to the IRS for a PLR.
> I see this as a 50-50% situation that could go either way.

Well, since I started a similar discussion here a couple of
years ago, I would take the partial exclusion. I would keep
my reason focused on the fact that they were actively
seeking the new employment and making a profit was just a
side benefit.

The way I look at it is that if we wait for someone else to
stick their necks out to create new safe harbor reasons, we
are loosing our clients money. Just make sure the clients
know the risk they are taking and the cost of losing the
position taken.

Mike Lewis, CPA

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#4 02-21-2005, 07:44 AM

"Thomas Healy" <tomhealycpa[at]earthlink.net> wrote:

- quote -

> Two months later the negotiations broke down over benefits,
> and my client didn't take the job.
> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor. There is also the
> fact that they did profit from the transaction, which might
> a priori deny them the exclusion.

IMHO, it seems the impetus for selling the home was purely
the profit, since a firm job offer was not in hand. If the
job offer had been finalized and the sale was in preparation
for the move and then the "employer" decided to back out, I
could see a case. But from what you describe I can't see it.

A

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#3 02-21-2005, 06:28 AM

Thomas Healy wrote:

- quote -

> Some of you have commented that there has been a fall-off in
> professional to professional discussion. Herewith my
> contribution to get it rolling:
> My client was negotiating for a new job in another state
> late in 2003 and into early 2004. They made several trips
> investigating the area and getting acquainted with the
> employer. In January 2004 a Realtor approached them out of
> the blue with a buyer who was willing to pay them $50,000
> more than they paid for their home 9 months previously. As
> part of getting ready for the new job, they took the offer,
> sold the home, and moved into an apartment.
> Two months later the negotiations broke down over benefits,
> and my client didn't take the job.
> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor. There is also the
> fact that they did profit from the transaction, which might
> a priori deny them the exclusion.
> What would you recommend, and why:
> 1. Take the exclusion, and have the client write a memo
> to his tax file putting the circumstances in the best
> light;
> 2. Don't take the exclusion now, but amend the return in a
> couple of years (hopefully some helpful PLRs or other
> guidance might show up in the meantime).
> 3. Apply to the IRS for a PLR.
> I see this as a 50-50% situation that could go either way.

I agree that this does not fit into any of the safe harbors
identified in the Temp. Regs. You could spend the client's
money to obtain a ruling but I think it is a waste of time.
The decision to capitalize on a fortuitous opportunity was
personal and a prudent individual could have foreseen that
there was a risk of losing the exclusion if the job offer
never materialized.

--
Alan
http://taxtopics.net

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#2 02-21-2005, 06:28 AM

Thomas Healy wrote:

- quote -

> Some of you have commented that there has been a fall-off in
> professional to professional discussion. Herewith my
> contribution to get it rolling:
> My client was negotiating for a new job in another state
> late in 2003 and into early 2004. They made several trips
> investigating the area and getting acquainted with the
> employer. In January 2004 a Realtor approached them out of
> the blue with a buyer who was willing to pay them $50,000
> more than they paid for their home 9 months previously. As
> part of getting ready for the new job, they took the offer,
> sold the home, and moved into an apartment.
> Two months later the negotiations broke down over benefits,
> and my client didn't take the job.
> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor. There is also the
> fact that they did profit from the transaction, which might
> a priori deny them the exclusion.
> What would you recommend, and why:
> 1. Take the exclusion, and have the client write a memo
> to his tax file putting the circumstances in the best
> light;
> 2. Don't take the exclusion now, but amend the return in a
> couple of years (hopefully some helpful PLRs or other
> guidance might show up in the meantime).
> 3. Apply to the IRS for a PLR.
> I see this as a 50-50% situation that could go either way.

Hello Tom

Without researching the issue, I would at least consider
this strategy:

First, file a return showing the gain and paying the tax.

Second, after 4/15 (or at least some interval of time) file
an amended return taking the exclusion.

This will force IRS to at least look at the matter and make
a decision. The amended return would be a timely claim for
refund, if IRS should ever make some sort of public ruling.

Of course, it does run a somewhat higher risk of being
rejected. Filing the original return with the exclusion
could slip by the standard processing.

I don't see much value to attaching any explanations to
original returns. I am convinced that no one at IRS ever
reads or pays any attention to things like this. Data
processing people input numbers and the file goes into
storage; any review has to be very cursory.

Lanny K. Williams, CPA
Nawarat,Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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#1 02-21-2005, 06:28 AM

Thomas Healy wrote:

- quote -

> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor.

I think I agree that no safe harbors were met, and therefore
your only hope is for unforeseen circumstances.

My gut feeling is that so long as the client can "prove"
that significant job negotiations were underway
(correspondence, travel records, etc.), AND so long as the
client accepts the "risks" associated with a claim of
unforeseen circumstances, I would go for it. However, if the
client is nervous about the situation, I would go for your
second option (pay now and amend later if supportable).

It doesn't seem like there is enough money at stake to
justify a PLR request. And, since this is inevitably a
"facts and circumstances" question (more than a "law"
question), the IRS might decline to issue such a ruling in
any event.

MTW

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02-21-2005, 05:50 AM

"Thomas Healy" <tomhealycpa[at]earthlink.net> wrote

- quote -

> My client was negotiating for a new job in another state
> late in 2003 and into early 2004. They made several trips
> investigating the area and getting acquainted with the
> employer. In January 2004 a Realtor approached them out of
> the blue with a buyer who was willing to pay them $50,000
> more than they paid for their home 9 months previously. As
> part of getting ready for the new job, they took the offer,
> sold the home, and moved into an apartment.
> Two months later the negotiations broke down over benefits,
> and my client didn't take the job.
> The question: Is this an Unforeseen Circumstance that would
> allow my client to use the partial exclusion of gain? As I
> see it, while the sale was in connection with the potential
> job, because no job actually resulted, they can't use the
> job safe harbor, or any other safe harbor. There is also the
> fact that they did profit from the transaction, which might
> a priori deny them the exclusion.
> What would you recommend, and why:
> 1. Take the exclusion, and have the client write a memo
> to his tax file putting the circumstances in the best
> light;
> 2. Don't take the exclusion now, but amend the return in a
> couple of years (hopefully some helpful PLRs or other
> guidance might show up in the meantime).
> 3. Apply to the IRS for a PLR.
> I see this as a 50-50% situation that could go either way.

As they all are.

But, given that the sale was related to the new job, which
is an exception; and that the "loss" of that job would also
fall into an exclusion, I'd say it's better than 50/50.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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#-1 02-18-2005, 10:17 AM

Hello, all,

Some of you have commented that there has been a fall-off in
professional to professional discussion. Herewith my
contribution to get it rolling:

My client was negotiating for a new job in another state
late in 2003 and into early 2004. They made several trips
investigating the area and getting acquainted with the
employer. In January 2004 a Realtor approached them out of
the blue with a buyer who was willing to pay them $50,000
more than they paid for their home 9 months previously. As
part of getting ready for the new job, they took the offer,
sold the home, and moved into an apartment.

Two months later the negotiations broke down over benefits,
and my client didn't take the job.

The question: Is this an Unforeseen Circumstance that would
allow my client to use the partial exclusion of gain? As I
see it, while the sale was in connection with the potential
job, because no job actually resulted, they can't use the
job safe harbor, or any other safe harbor. There is also the
fact that they did profit from the transaction, which might
a priori deny them the exclusion.

What would you recommend, and why:
1. Take the exclusion, and have the client write a memo
to his tax file putting the circumstances in the best
light;
2. Don't take the exclusion now, but amend the return in a
couple of years (hopefully some helpful PLRs or other
guidance might show up in the meantime).
3. Apply to the IRS for a PLR.

I see this as a 50-50% situation that could go either way.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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