"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

Well, section 6323(c)(7) says that a personal residence
contains not more than four dwelling units and occupied by
the owner. There are many other references to "residence"
or "personal residence" but, as you note no definition of
the term.

- quote -

Basic rules of statutory construction say that first you
look at what the statute says, and then you interpret words
based on their ordinary meaning. Since the definition in
section 280A says it's limited to that section, it defines
its own limitation and you should take it seriously.

Additionally, the ordinary meaning of a personal residence
does not include the place any relative lives. As Mike
notes, it is not the "personal" residence of the adult
siblings. So it is very unlikely that a court would ever
hold that the siblings are entitled to claim $250,000
credits.

Stu

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Stuart A. Bronstein wrote:
- quote -

I guess you seem to miss one important point: It first has
to be a personal residence before it can be called the
principal residence. Do you see another defintion of
personal residence elsewhere in the IRC?

Remember the statute that says that one cannot conclude a
limitation of applicability (unless a statute lists its own
limitation) simply due to the placement of a statute in a
particular section of the IRC?

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Stuart A. Bronstein wrote:
- quote -

Aside, as a response to the 318 issue: Immaterial, per the
Tax Court ruling.

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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

I just looked at it again. Section 280A deals with business
use of a home, not the credit on the sale of a principal
residence.

In addition, section 280A(d)(2) says,

"For purposes of this section, the taxpayer shall be deemed
to have used a dwelling unit for personal purposes for a day
if, for any part of such day, the unit is used:
(A) for personal purposes by the taxpayer or any other
person who has an interest in such unit, or by any member of
the family (as defined in section 267(c)(4)) of the taxpayer
or such other person;..."

So any attribution due to use by a member of the family only
applies with respect to that section alone, and not to the
credit.

Stu

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D. Stussy wrote:

- quote -

But that wouldn't make it the PRINCIPAL residence of the
other siblings unless they actually lived there.

MTW

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

And that includes siblings, pursuant to section 267(c)(4)!

Thanks very much for that!

- quote -

Actually, upon death the property became the legal property
of the children of the deceased. The estate was the owner
for purely administrative purposes.

Stu

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> wrote:
- quote -

There are four children, so the executor only receives
one-quarter. To avoid disputes the property was sold during
pendency of the probate.

- quote -

I recently looked at the title of the 500 most expensive
properties in San Francisco in which the owner resided.
About 60% were not in trust or corporate ownership.

Stu

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MTW wrote:
- quote -

Why not? "Personal use" can count the use of an immediate
family member at less than fair rental value (cf. IRC
280A(d)(2)). [Since the deceased was the owner, we avoid
the nasty outcome that could be implied from Stock transfers
between siblings and IRC 318 that was recently in some
tax/accounting journals - cf. Garber Industries Holding v.
CIR, 124 TC 1 (to the extent that a parallel can be drawn to
that case).]

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MTW wrote:
- quote -

I don't see why that would be necessary (1041 and 1040), and
I live in California.

She may not have been the owner of record (in her own name),
but as executor also a beneficiary, she certainly had
control. Her two years count for the exclusion, and upon
the resolution of probate, it transfers to her own name
(retroactively).

This is just my opinion. Why there was no family trust
(common here in CA) to avoid probate is what mystifies me.

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Stuart A. Bronstein wrote:

- quote -

Quick answer: I don't think so. Her exclusion would still be
$250,000. But, that could only be applied against 25% of the
gain.

In other words, the other three siblings who did NOT live in
the house for 2 years should NOT end up benefiting from the
one sibling's exclusion.

MTW

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

I haven't found any tax cases dealing with the situation.
But I did find a number of bankruptcy cases in which the
courts determined that the bankrupt was entitled to the
benefits of section 121 in spite of the fact that the
bankruptcy trustee became the legal owner as a fiduciary.
Those rulings are based on section 6903(a), which says,

"Upon notice to the Secretary that any person is acting for
another person in a fiduciary capacity, such fiduciary shall
assume the powers, rights, duties, and privileges of such
other person in respect of a tax imposed by this title
(except as otherwise specifically provided and except that
the tax shall be collected from the estate of such other
person), until notice is given that the fiduciary capacity
has terminated."

In the case of a decedent's estate my argument is that the
executor is the fiduciary for the heirs, who are the actual
owners during pendency of the probate. So that the heirs,
of meeting the residence requirement, should qualify for the
exclusion.

Stu

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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

She is one of four, so her share is 25%. Does that mean her
exclusion is limited to $62,500?

- quote -

That's what I'm going for, yes.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

No experience other than that if she is considered the
actual owner under state law, than she meets the ownership
test. Obviously living there has her meeting the use test.
Moreover, I seem to recall something about estate
beneficiaries and Sec. 121. I'm not inclined to look
myself, but its possible that beneficiaries qualify for
ownership under federal tax law as well as state law.

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

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Stuart A. Bronstein wrote:

- quote -

No experience with that exact scenario. But, I would agree
that if she "owned" and "used" the place for two years, the
exclusion is hers.

That is, it is hers to the extent of her percentage share in
the ownership. You mentioned that she was "one" of the
children of the deceased. What is the percentage, etc.?

It could be necessary to report the sale on a 1041. Your
client would then claim the exclusion on her 1040 with
respect to the share passed through to her on the K-1, if
you follow me.

MTW

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Stuart A. Bronstein wrote:

- quote -

Not here, however..... even though she became owner under
California law when parent died, when was/will title be
transferred? You reckon IRS (upon audit naturally) might
look to this as controlling factor?

ChEAr$,
Harlan Lunsford, EA n LA
Wed 23 Feb 2005

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I've got a situation and would appreciate your experience.

I represent an estate that has been open for more than two
years and is near to being closed. The executor is one of
the children of the deceased, who came here from Europe
where she'd lived for many years.

She now decided to stay here. Because of that, she lived in
the estate's property until it was sold.

The house was sold through the probate, which was pretty
much the last step before closing the estate.

Under California law an heir technically becomes the owner
of property the moment the parent (or whoever) dies, subject
to administration of the estate. Because she was both an
owner of the property and lived there for two years, I
contend that the executor is entitled to the $250,000
exemption (the house sold for nearly $300,000 more than the
appraised value).

Two tax preparers she's consulted don't agree. Ok, one
disagrees, the other says that it's ok if that's what I
advise.

Any experiences dealing with this issue?

Stu

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