"Will" <westes-usc[at]noemail.nospam> wrote:

- quote -

Maybe wishful thinking, maybe unrealistic expectations, but
definitely not law.

- quote -

How can you improve without goals for doing so?

If an amended return claims a refund, the taxpayer has a
legal right to bring suit for refund in the US District
Court or the Court of Federal Claims if the amended return
isn't honored within 6 months. If that's not good enough
for you, write Congress.

- quote -

No. It's kind of like people telling me I'm fat. It may
surprise them, but I already knew.

--
Phil Marti
Clarksburg, MD

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"Will" <westes-usc[at]noemail.nospam> wrote:

- quote -

as to the rule you mention in paragraph 1, seems you might
be confusing as a "rule" the 60 days the irs can extend the
statute of limitations on a return for if an amended return
is filed

you might find your answers here

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This is similar to a situation where there are 2 legal units
that have (e.g. condominiums) that have been physically
combined and lived in together and then 1 of the 2 is to be
sold and the other retained. Assuming the taxpayer lived in
both units for > 2 of 5 years and that the units remained
legally separate units, would Section 121 (d) apply to deny
any part of the exemption or could the sale of the unit that
was lived in meet the requirement for a full or at least a
one half 500,000 exemption? Does it all depends on what "is"
means.

Howard

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Will wrote:
- quote -


A living trust does not become the owner. A living trust is
just one tool in estate (life) planning designed to
accomplish the following: avoid the cost of probate
especially if you have property in multiple states; keep
from public scrutiny how one's assets are distributed after
death; provide for the managing of assets in case of
disability or incapacitation and avoid contesting of a will.

If you want more information on estate planning and do not
want to pay for the service (at least before you become more
familiar with estate planning) here are a few websites that
I recommend for educational purposes:
http://www.tiaa-cref.org/pubs/html/estate_plan/
http://smartmoney.com/estate/
http://www.toolkit.cch.com/text/P08_8161.asp
http://www.smartmoney.com/estate/ind...?story=passing
http://home.earthlink.net/~dwmoltzen/

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Will wrote:
- quote -

Believe it.

- quote -

Probably none, because of the increased cost basis due to
death of one spouse and the section 121 exclusion amount.
Any non-excluded appreciation between date of death and sale
date is taxed at Long Term capital gain rates (maximum 15%).
If the house is sold in a year AFTER the year of death, the
exclusion amount drops to $250,000.

- quote -

No change. A living trust is a non-entity for taxation
purposes.

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"Phil Marti" <prm20871[at]verizon.net> wrote:
- quote -

To me it appears that the regulations may well be more
generous than the statute. It seems to me the statute would
prohibit the exemption for any sale of less than an
individual's total interest in a property, with the
exception of the sale of a remainder interest.

Stu

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"Will" <DELETE_westes[at]earthbroadcast.com> wrote:
- quote -

The deceased spouse's half is included in his taxable estate
for estate tax purposes. That's the justification for
increasing the basis, even though there may in fact be no
estate tax due.

Note that in 2010 (I think) when the estate tax goes away
completely, at least for that year, I believe that no
step-up in basis occurs.

- quote -

As the result of the sale? Only whatever income tax may be
due based on the date-of-death value basis.

- quote -

What a living trust can do is prevent what I call the
marital penalty in the estate tax. Because of the unlimited
marital deduction what tends to happen without trusts is
that one spouse leaves everything he has to the other
spouse. There is no estate tax on the first death, and the
estate tax personal exemption is wasted.

Then when the second spouse dies everything that had been
owned by both spouses is included in the taxable estate,
both raising the estate into a higher marginal tax bracket
and also allowing only one personal exemption.

Stu

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Will" <DELETE_westes[at]earthbroadcast.com> wrote:

- quote -

In order to claim the exclusion, you must "dispose" of your
interest in the property. Selling an undivided interest in
your home is not a disposal; therefore, the sale would not
qualify for the exclusion.

In the example given, the couple sold approximately 1/3 of
their interest. Their basis in that 1/3 would be $16,667,
leaving them with a taxable gain of $483,333.

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

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I have heard that the IRS has some internal rule that it
must process an amended return within 60 days. Can someone
tell me whether this is based on some very informal internal
guideline, or does it have any basis in law?

My accountant tells me that he routinely sees amended
returns take 6 to 9 months before the taxpayer even gets a
request for information, and once the information is
supplied he says it can take three or more months just for
the IRS to rubber stamp the return if they agree with it.
What's the point of such a guideline if it has no basis in
truth, and if it is not the basis for any enforcement action
against the IRS?

If I'm providing an IRS agent with information, is there any
sense in reminding them that this deadline has long ago
passed, and trying to press for a decision? I get the
feeling that the 60 day rule means nothing to them
internally, and no court would care about it either. Is it
just someone's idea of marketing?

--
Will

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"A.G. Kalman" <glendale202-mtmtax[at]yahoo.com> wrote:

- quote -

Since I'm not believing that the government would just give
the stepped up cost basis away for free, I'm smelling a tax
in there somewhere.

If the house is sold after the date of death, what taxes are
due?

How would a living trust becoming the owner of the residence
affect that situation?

--
Will

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Will wrote:

- quote -

Forget about the first part as you can't avoid the
recognized gain of $1M.

In the year of death of a spouse you can still file a joint
return. Assuming that you both qualified for the exclusion
you would get the full $500K exclusion in the year of death.
If the house is sold in the same year of death but after the
date of death, your cost basis going to get stepped up such
that the new basis will be 100% of FMV on date of death if
community property or 50% of FMV on date of death plus your
cost basis of the other 50% ownership.

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"Will" <DELETE_westes[at]earthbroadcast.com> wrote:

- quote -

Your math is faulty. If you sell a portion of something,
you only attribute that portion of the basis to the sale.
To make the numbers easier, let's say the property is worth
$1.5 million and the basis is $60,000. You sell an
undivided 1/3 interest in the property to Mr. Investor.
Your gain is $500,000 minus $20,000, with your basis in the
retained interest at $40,000.

- quote -

The exclusion applies, and they get their (recalculated)
gain tax-free.

- quote -

I assume "they" are the former sole owners. As noted above,
selling a portion of an asset decreases the basis of the
remaining portion.

- quote -

The regulations saw this one coming. One exclusion per
property, no matter how many different bits of it you sell
at different times. While regulations don't have the same
clout that the statute does, I think you'd have a hard time
convincing a court that this one violates the intent of the
statute.

- quote -

First, if the surviving spouse doesn't remarry before the
end of the year, they can still file a joint return. Even
on separate returns each would get a $250,000 exclusion.

--
Phil Marti
Clarksburg, MD

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"Will" <DELETE_westes[at]earthbroadcast.com> wrote:

- quote -

I haven't researched this, but based on the terms of section
121(d) (8)(A), I'd have to say that sale of anything less
than all of the property is unlikely to qualify, other than
the sale of a remainder interest. That statute says,

"At the election of the taxpayer, this section shall not
fail to apply to the sale or exchange of an interest in a
principal residence by reason of such interest being a
remainder interest in such residence, but this section shall
not apply to any other interest in such residence which is
sold or exchanged separately."

Stu

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Couples can take up to $500K in capital gains on a home sale
tax free. Single taxpayers can take up to $250K. If a
couple has a $1.5M+ equity gain in a home on which they have
a $50K cost basis, can they sell 550K of the equity to an
investor and claim that $500K is tax free? In this example,
how is the $550K payment by the investor taxed?

Would the investors payment adjust their cost basis in the
home by $500K to $550K? And would a sale of the home in -
say - five years then owe capital gains on the full amount
of the gain over $550K?

Let's say the home is sold in its entirety and a $500K
exclusion is allowed. What happens if one of the two
taxpayers dies during the year of the sale. Would the
surviving spouse be forced to file as a single taxpayer, and
therefore only be allowed a $250K exclusion, losing the
remaining $250K of the full $500K exclusion due to death of
the spouse?

--
Will

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