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

What is an "appropriate structure"? I've known people who
lived in tents.

But they didn't own the land, so this issue wouldn't have
arisen.

Seth

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tim[at]timkelly.com wrote:

- quote -

Thanks. My service has just the official and West reports.

- quote -

I agree. My statement was only referring to land versus
structure on the land, not necessarily to mobile forms of
homes.

Stu

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Stuart A. Bronstein wrote:
- quote -

Stu, maybe you should get a better service. I am using
LEXIS. Here are the complete cites for these two cases.

Gummer - No. 97-297 T - 40 Fed. Cl. 812; 1998 U.S. Claims
LEXIS 84; 98-1 U.S. Tax Cas. (CCH) P50,401; 81 A.F.T.R.2d
(RIA) 1740

Cyr - T.C. Memo 1984-515; 1984 Tax Ct. Memo LEXIS 156; 48
T.C.M. (CCH) 1240; T.C.M. (RIA) 84515

I must disagree with you about there being an assumption
about land in the statute, especially in light of the Cyr
case, since vessels and motorhomes might also qualify.

Timothy E Kelly
Certified Specialist in Taxation Law
State Bar of California
Board of Legal Specialization

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The correct citation for Gummer is 81 AFTR 2d 98-1740 (40
Fed.Cl. 812), 4/30/1998. The Cyr cite given was almost
correct, but it's a TCM, so TC Memo 1984-515. Both cases
are on RIA's Checkpoint service.

I think if you look at the =A71.121 regulations, it is very
clear that a taxpayer has to live in *one* "dwelling unit"
for two years out of five to qualify. The regs also talk
about "the residence" when discussing the two-year rule as
does the legislative history: "a taxpayer must have owned
the residence and occupied it as a principal residence for
at least two of the five years prior to the sale or
exchange." Can a mobile home be torn down and a "regular"
house built in its place and the two dwelling units
considered to be "the residence"?

If you look at all of the verbiage in the regs, I don't
think you can get "there" and unequivocally state that a
residence can be torn down and replaced and not start the
clock ticking from zero.

That being said, I can understand how another practitioner
could see it the other way. Additionally, I would very much
like to see the Service clarify this issue in favor of Stu's
position.

Although I do not prepare individual tax returns, I would
have no problem taking Stu's position on a client's tax
return if:

1) the client agreed to properly disclose the position
within the tax return; and

2) the client signed a letter agreeing to the understanding
of the risks of taking the position and agreeing to taking
said position on the return.

Alternatively, the client could file a return not taking the
position and pay the tax. The client could then file an
amended tax return (after the final due date including
extensions so as not to constitute an original return)
disclosing and taking the position in an attempt to get the
refund. The danger may be in how the Service handles
amended returns for individuals.

Since PLR requests are now pretty expensive ($6,000 I think
just in IRS fees), doing it the above way *may be* cheaper.

Peter C. Gatto, CPA

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tim[at]timkelly.com wrote:

- quote -

I was unable to find that case or any reference to it.

- quote -

Nor was I able to find that case.

- quote -

That's not surprising, since it's reasonable to say that
there must be an appropriate structure on land before it can
be used as a principal residence. But that doesn't mean if
one appropriate structure is replaced by another on the same
piece of real estate, that it doesn't qualify under section
121. That's not what the statute says.

Stu

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"lesstax" <paylesstax[at]aol.com> wrote:

- quote -

Do you have a cite for that? To me this conclusion seems
contrary to the language of the statute.

Stu

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"lesstax" <paylesstax[at]aol.com> wrote:

- quote -

Do you have a cite for that? To me this conclusion seems
contrary to the language of the statute.

Stu

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tim[at]timkelly.com wrote:

- quote -

I was unable to find that case or any reference to it.

- quote -

Nor was I able to find that case.

- quote -

That's not surprising, since it's reasonable to say that
there must be an appropriate structure on land before it can
be used as a principal residence. But that doesn't mean if
one appropriate structure is replaced by another on the same
piece of real estate, that it doesn't qualify under section
121. That's not what the statute says.

Stu

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The Gummer case (Court of Claims, 97-297T) discussed the
legislative history supporting the intent to use the same
body of law from the old 1034 to define principal residence
for section 121.

Then, in Cyr v. Commissioner, (1984-515) the Tax Court dealt
with a situation where a taxpayer had physically moved a
home onto property and the Service sought to disallow a
housing credit based on failing to meet a time requirement.
The Tax Court said it was the structure that counted, not
the geographic location.

In addition, Treasury Regulation (concerning the definition
of principal residence) 1.44-5(a) makes numerous references
to different kinds of structures but not to land.

Since use as a principal residence requires occupancy ( even
a home under construction - see Skorniak v. Commissioner TCM
1996-178) I do not see how the time requirement concerning
the new structure could be met.

Tim

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i stand corrected re: personal property.

Main Home
This section explains the term "main home." Usually, the
home you live in most of the time is your main home and
can be a:

House,
Houseboat,
Mobile home,
Cooperative apartment, or
Condominium.

To exclude gain under the rules in this publication, you
generally must have owned and lived in the property as
your main home for at least 2 years during the 5-year
period ending on the date of sale.

Land. If you sell the land on which your main home is
located, but not the house itself, you cannot exclude
any gain you have from the sale of the land.

Example.

On March 4, 2004, you sell the land on which your main
home is located. You buy another piece of land and move
your house to it. This sale is not considered a sale of
your main home, and you cannot exclude any gain on the
sale of the land.

Vacant land. The sale of vacant land is not a sale of
your main home unless: The vacant land is adjacent to
land containing your home,

You owned and used the vacant land as part of your main
home,

The sale of your home satisfies the requirements for
exclusion and occurs within 2 years before or 2 years
after the date of the sale of the vacant land, and

The other requirements for excluding gain from the sale
of the vacant land have been satisfied.

If these requirements are met, the sale of the home and
the sale of the vacant land are treated as one sale and
only one maximum exclusion can be applied to any gain.
See Excluding the Gain, later.

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Lanny K Williams CPA <lanny[at]expatriatetax.net> wrote:
- quote -

Actually it's property used as a principal residence. But you're
right, it doesn't say it has to be real property.

On the other hand, if someone uses real property as his principal
residence because there's a mobile home on it, and he later builds
a house and replaces the mobile hom, and he continues to use the
same real property as his principal residence, I don't see why
there should be a problem if he used the real property for more
than two years, though he only lived in the house for a short time.

Stu

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lesstax wrote:

- quote -

Where does it say that. The 2 year rule applies to the sale
of one's "principle residence." A principle residence does
not have to be a house -- a mobile home or even a boat can
be one's principle residence.

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

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right, fire is not the same thing but the 2 yr rule still
does not apply to personal property.

the hawk

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glendale202-tax[at]yahoo.com (A.G. Kalman) wrote:
- quote -

Which regulation is that? The only applicable regulation I
could find was one that said that an involuntary conversion
is treated as an unforseen circumstance. I haven't seen
anything that implies that section 121 only applies to the
structure rather than the property itself.

Stu

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lesstax wrote:

- quote -

The house burning to the ground and being replaced deals
with an involuntary conversion which is specifically
addressed in the Regs. This case deals with the sale of a
dwelling unit. Not the same thing.

--
Alan
http://taxtopics.net

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the two year rule applies to real property not personal
property. 18 year ownership of the land passes the 2 year
rule.. consider if the home burned to the ground and was
rebuilt, would the clock be reset.. no.

the hawk

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Stuart Bronstein wrote:
- quote -

It's been awhile since I have read the various rulings on
the old Sec. 1034. In this instance, I don't think it is
relevant as that section dealt explicitly with deferring
gain when one buys or builds a new home as a replacement
within the required time frame. The new Regs discuss the
dwelling unit as being separate from land. This comes up in
the discussion of selling vacant land. It just seems to me
that without any specific ruling, the new code and regs
would treat the sale of the dwelling unit as a sale of the
main home.

--
Alan
http://taxtopics.net

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Paul A. Thomas wrote:
- quote -

It is not the same thing as one losing a home in a
fire/flood or any other type of involuntary conversion. The
Regs explicitly address that situation and provide the
framework for calculating gain, if any, and calculating
basis of the replacement home. Time spent in the house
destroyed counts as time spent in the replacement home. The
new Regs while not on point, do address under certain
conditions the sale of land. My reading of the new Regs lead
me to conclude that any sale of the physical residence,
whether it be fixed or mobile, is a sale of the main home
for purposes of Sec. 121. Also see my reply to Stuart
regarding the old Sec. 1034.

--
Alan
http://taxtopics.net

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A.G. Kalman wrote:
- quote -

(snipped)

Agree with Alan in that the clock is reset with the new
residence. Only if you built the new residence around, over
and above the mobile home (trailer we used to call it down
South) could the usage be continuous. Thus those costs
would be added to the basis of the older part of the
dwelling.

Of course given the OP's salutation of "Hi, y'all", he may
be harkening back to olden days when you lived on (and off)
the land, a dwelling being added thereto.

ChEAr$,
Harlan Lunsford, EA n LA

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glendale202-taxes[at]yahoo.com (A.G. Kalman) wrote:
- quote -

As Paul noted, the test is whether the "property" was his
residence, not the particular structure. This was clearly
the rule under section 1034. While the regulations for
section 121 do not appear to deal with the issue of new
construction on property used as a residence, there is no
reason to assume that the former rule won't apply on this
point.

Stu

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