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that this allocation is only done when sale of the Mercer Island house. Based to prove that this makes a difference
the taxpayer determines he or she has on the facts before it, the court stated by presenting evidence that they used
met the ownership and use require- that the Weberts did not have any resi- the house for any days during the five-
ments. While the parties had not dential use during the five-year period year period ending on the date of the
argued the point, in the Tax Court’s ending on the date of the sale, and, sale and, thus, would be entitled to a
view the exception to nonqualified use consequently, under the Sec. 121(c) partial exclusion if the primary reason
for temporary absences due to health exclusion limitation formula, their the house was sold was the change in
conditions in Sec. 121(b)(5)(C)(ii)(III) exclusion would be zero. Therefore, Catherine’s health. If the Tax Court’s
did not override the use requirements in the absence of additional argument description of the facts regarding the
for the Sec. 121(a) exclusion. Thus, from the Weberts about the use of Weberts’ use of the house in its order
because the Weberts did not meet the the house, a trial would not be needed is accurate, it would appear that there
use requirement, it made no difference to decide whether Catherine’s health is little or no chance of the couple’s
whether Catherine’s health problems problems were the primary reason for doing that.
would allow any use to be character- their sale of the Mercer Island house. Webert, T.C. Memo. 2022-32 ■
ized as nonqualified use.
In addition, the Tax Court observed Reflections
that while Catherine’s health problems Based on the Tax Court’s order, it Contributor
might make the Weberts eligible for would seem likely that the Weberts James A. Beavers, CPA, CGMA, J.D.,
the Sec. 121(c) exclusion, that exclu- will prevail on the issue of whether the LL.M., is The Tax Adviser’s tax techni-
sion provision, as discussed above, is Mercer Island house was sold by rea- cal content manager. For more infor-
subject to a limitation based on use son of the change in Catherine’s health mation about this column, contact
that might prevent the Weberts from if the case goes to trial. However, to thetaxadviser@aicpa.org.
excluding any of their gain from the get to trial, the Weberts will still need

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