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I just got back from my tax preparers office and I think that he just might be full of shit about something.
Last year I sold a house which I lived in for a little less than 2 years (unfortunately). I did have a fairly decent capital gain and expected to have to hand a nice little chunk of it over to uncle dubya since the "new" house that I bought was cheaper than the one I sold. Tax dude claims that so long as my down payment on the new crib is higher than the gain, I get over. I was under the impression that the only way to get out of paying a capital gain was to either be in the house for more than 2 years or buy a more expensive pad. I paid considerably less for the new place, but, it is a fixxer upper and I will be dumping a fair amount of cayshe into it. But, even after I am done making home depot rich, I will still not have exceeded the sale price of the old house.
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Sweet. I have some Home Depot stock and Tony Stewart in the NASCAR forum.
Was there a question?
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IRS-PUB, 2001, IRS Publication No. 17, Ownership and Use Tests
Publication No. 17:
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:
1) Owned the home for at least 2 years (the ownership test), and
2) Lived in the home as your main home for at least 2 years (the use test).
Exception. If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. The maximum amount you can claim will be reduced. See Reduced Maximum Exclusion , earlier.
Period of ownership and use. The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous.
You meet the tests if you can show that you owned and lived in the property
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IRS-PUB, 2001, IRS Publication No. 17, Reduced Maximum Exclusion
Publication No. 17:
Reduced Maximum Exclusion
You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced, if either of the following is true.
1) You did not meet the ownership and use tests, but you sold the home due to:
a) A change in place of employment,
b) Health, or
c) Unforeseen circumstances, to the extent provided in regulations (as discussed later).
2) Your exclusion would have been disallowed because of the rule described in More Than One Home Sold During 2-Year Period , later, except that you sold the home due to:
a) A change in place of employment,
b) Health, or
c) Unforeseen circumstances, to the extent provided in regulations (as discussed next).
Use Worksheet 3 in Publication 523 to figure your reduced maximum exclusion.
Unforeseen circumstances. The IRS has not issued regulations defining unforeseen circumstances. You cannot claim an exclusion based on unforeseen circumstances until the IRS issues final regulations or other appropriate guidance.
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yt,
I realize I don't meet the current rules for the cap gain exclusion based on the 2 year occupancy rules. There was no hardship, nobody got sick, didn't change jobs, nothing like that. I just ran across a sweet deal on a VA forclosure which allowed me to move 5 miles down the road to a better town on a larger lot and was able to go from a 30 to a fifteen year mortgage and still lower my payment by about 50 bones a month.
The type of exclusion I was curious about is the one that existed before the 2 year rule went into effect which, to the best of my knowledge stated that you didn't have to pay cap gains so long as you rolled the gain into your new casa. I was under the impression that said new casaa had to be more expensive than the old one. Is this so? I haven't found anything yet in the code which addresses this.
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<BLOCKQUOTE><font size=2 face="Verdana, Helvetica, sans-serif">quote:</font><table border="0" width="90%" bgcolor="#333333" cellspacing="1" cellpadding="0"><tr><td width="100%"><table border="0" width="100%" cellspacing="0" cellpadding="2" bgcolor="#FF9900"><tr><td width="100%" bgcolor="#DDDDDD"><font size=2 face="Verdana, Helvetica, sans-serif">Originally posted by smackaholic:
I just ran across a sweet deal on a VA forclosure which allowed me to move 5 miles down the road to a better town on a larger lot and was able to go from a 30 to a fifteen year mortgage and still lower my payment by about 50 bones a month.</font></td></tr></table></td></tr></table></BLOCKQUOTE>
asshole
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<BLOCKQUOTE><font size=2 face="Verdana, Helvetica, sans-serif">quote:</font><table border="0" width="90%" bgcolor="#333333" cellspacing="1" cellpadding="0"><tr><td width="100%"><table border="0" width="100%" cellspacing="0" cellpadding="2" bgcolor="#FF9900"><tr><td width="100%" bgcolor="#DDDDDD"><font size=2 face="Verdana, Helvetica, sans-serif">Originally posted by smackaholic:
yt,
I realize I don't meet the current rules for the cap gain exclusion based on the 2 year occupancy rules. There was no hardship, nobody got sick, didn't change jobs, nothing like that. I just ran across a sweet deal on a VA forclosure which allowed me to move 5 miles down the road to a better town on a larger lot and was able to go from a 30 to a fifteen year mortgage and still lower my payment by about 50 bones a month.
The type of exclusion I was curious about is the one that existed before the 2 year rule went into effect which, to the best of my knowledge stated that you didn't have to pay cap gains so long as you rolled the gain into your new casa. I was under the impression that said new casaa had to be more expensive than the old one. Is this so? I haven't found anything yet in the code which addresses this.</font></td></tr></table></td></tr></table></BLOCKQUOTE>
You are referring to the pre-1997 rules which won't apply in your case. I know these aren't the answers you want to hear, but its all we got.
The 2 years thing is correct, the part about buying a more expensive place was the old rule.
I have never heard of that down payment thing. But with the new rules and the high exclusion of gain levels, I honestly have not had a client exceed that gain level since the new rules went into effect.
If you're ot comfortable with what the CPA did, I would advise a second opinion from someone who you can give all the facts too.
Good luck with the new place.
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You're missing the larger point:
IRS-PUB, 2001, IRS Publication No. 241, Unequal Frequency Overlapping Stations
Publication No. 391:
Overlapping Stations Maximum Exclusion
You can claim an exclusion, but the maximum amount of gain you can exclude will be reduced by the minimum amount of exclusion you gain, if either of the following is true.
* You understood that last sentence.
* You own at least thirteen pairs of white socks.
* The man broke me chain.
Your exclusion will be disallowed and more time will be put on the clock if you meet the following rules:
1. You lived in a home for more than 2 years, but less than 5 years, and never punched a hole in any wall. (see IRS publication, "Living with an Asshole." p5634234)
2. You did not kill the jerkoff in the green house, even after he blew shredded walnuts into your yard with his riding lawnmower and let his dog bark all night. (see IRS publication, "Living Next To an Asshole." p56344422)
Deductions for any of the following home improvements are not allowed:
* Excessive whirling plastic detritus
* Silhouette of waving farmer
* More than one bird bath
* Old bathtub w/Virgin Mary
Use Worksheet 3 in Publication 523, Wasting Another 15 Minutes of Your Fucking Life.
Unforeseen circumstances. The IRS has not issued regulations defining unforeseen circumstances. Therefore, you cannot claim an exemption for any of the following:
* Being hit by a safe.
* Being sodomized by an ostrich
* Attending a Wayne Newton concert
* Falling into a antique threshing machine
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H&R Fester
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What's there to be confused about?
