WHEN BUYINg A HOME, eXPeCt tHe uneXPeCteD

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taX BITES



                 taX BITES
                 WHEN BUYINg A HOME, eXPeCt tHe uneXPeCteD
                 by Gail L. Richmond*


             C     ode section 121 provides an exclu-
                   sion of up to $250,000 ($500,000
             for certain married taxpayers) of gain
                                                         taxpayers had sold because of unfore-
                                                         seen circumstances. Readers are invited
                                                         to compose their own unforeseen cir-
                                                                                                         out of age-restricted community
                                                                                                         (PLR 200601023).
                                                                                                     •   Neighbors were hostile to a family
             from the sale of taxpayer’s principal       cumstances scenarios.                           member joining taxpayer’s house-
             residence. Section 121(c) lets taxpayers    • Taxpayer was bothered by excessive            hold while on house arrest/probation
             who fail to meet one of the two-year            airport noise (PLR 200702032).              (PLR 200403049).
             requirements (ownership, use as a prin-
                                                         • Co-owner became pregnant, but was         •   Taxpayer was accosted at gunpoint
             cipal residence, or time since the last
                                                             no longer in relationship with father       outside residence and forced to with-
             qualifying sale) qualify for a reduced
                                                             of expected child, and the home was         draw money from ATMs (PLR
             maximum exclusion. Section
                                                             too small for the two co-owners and         200630004).
             121(c)(2)(B) makes the reduced
                                                             child (PLR 200652041).                  •   Taxpayers and son were assaulted
             percentage available if the premature
             sale or exchange is “by reason of a         • Taxpayer had to provide separate              (separate events) in the new neigh-
             change in place of employment, health,          bedroom to be able to adopt an              borhood (PLR 200601009).
             or to the extent provided in regulations,       orphan girl from another country        •   Taxpayer’s address was discovered
             unforeseen circumstances.”                      (PLR 200613009).                            by associates of a drug dealer tax-
                 Treasury Regulation section 1.121-      • Taxpayer’s new spouse’s child lost            payer had arrested (PLR
             3(e)(1) defines unforeseen circum-              ride to school when sibling gradu-          200615011).
             stances (“the occurrence of an event that       ated and taxpayer and spouse then       •   Taxpayer was assigned to K-9 unit;
             the taxpayer could not reasonably have          had a baby, making house too small          homeowner’s association prohib-
             anticipated before purchasing and occu-         (PLR 200601022).                            ited kennels (PLR 200504012).
             pying the residence”), while section        • Taxpayers’ daughter lost her job but
             1.212-3(e)(2) includes a list of safe           couldn’t move herself (and her child)   * Nova Southeastern University Law Center, Fort
             harbor events. The list below covers rul-       in with taxpayers unless they moved       Lauderdale, FL.

             ings in which the Service agreed that




                                                                                                                                               NON-prOFIT
                                                                                                                                                      Org .
                                                                                                                                               u .S . pOSTagE
 DEFENDINg LIBErTY                                                                                                                                  pAI D
 pUrSUINg JUSTICE
                                                                                                                                               pErmIT #4889
                                                                                                                                              SuBurBaN, md
 ABA SECTION OF TAXATION

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