Taxable Sale of Principal Residence?

  1. You have chosen to ignore posts from rvd71. Show rvd71's posts

    Taxable Sale of Principal Residence?

    Taxpayer bought primary residence in 1998.  Lived there until July 2007, purchased and moved to new primary residence, and listed home #1 for sale.  No reasonable offers, so taxpayer began renting home #1 March 2008.  Home #1 rented until August 2010, but house was actively for sale throughout this time.  Home #1 vacant from Aug 2010 through sale in April 2011.

    In five-year lookback period, the home was owned by taxpayer the entire time, but: lived in as primary residence for 16 months; rented for 29 months; vacant for 15 months. 

    Home #1 sold at a gain, plus depreciation recapture from period of rental.

    Taxable sale of real estate because taxpayer does not meet 2 year out of 5 year rule?  Reportable on Form 4797 with depreciation recapture?  Subject to state tax as well? 

    Can unforeseen circumstances be used for reduced exclusion?  Can a recession/real estate crash be deemed an acceptable unforseen circumstance?  Taxpayer intent was to sell home #1 in July 2007.  How could they have known it would take almost 4 years for it to finally sell?

    Thanks in advance.

     
  2. You have chosen to ignore posts from MASocietyofCPAs. Show MASocietyofCPAs's posts

    Re: Taxable Sale of Principal Residence?

    In response to rvd71's comment:

    Taxpayer bought primary residence in 1998.  Lived there until July 2007, purchased and moved to new primary residence, and listed home #1 for sale.  No reasonable offers, so taxpayer began renting home #1 March 2008.  Home #1 rented until August 2010, but house was actively for sale throughout this time.  Home #1 vacant from Aug 2010 through sale in April 2011.

    In five-year lookback period, the home was owned by taxpayer the entire time, but: lived in as primary residence for 16 months; rented for 29 months; vacant for 15 months. 

    Home #1 sold at a gain, plus depreciation recapture from period of rental.

    Taxable sale of real estate because taxpayer does not meet 2 year out of 5 year rule?  Reportable on Form 4797 with depreciation recapture?  Subject to state tax as well? 

    Can unforeseen circumstances be used for reduced exclusion?  Can a recession/real estate crash be deemed an acceptable unforseen circumstance?  Taxpayer intent was to sell home #1 in July 2007.  How could they have known it would take almost 4 years for it to finally sell?

    Thanks in advance.

     

    Dear rvd71:

    Sorry, but there are no exceptions to the rules to qualify for the exclusion for sale of a principal residence due to exigent circumstances, other than in the short term (when you're forced to sell short of the two years for reasons beyond your control.  You either qualify for the exclusion or your don't.  From the facts you outline, the seller doesn't.

    Hope this helps in preparing your returns!

    Mark H. Misselbeck, C.P.A., M.S.T., Tax Principal

    Katz, Nannis + Solomon, P.C.

     

     
Sections
Shortcuts

Share