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Distance safe harbor. A change in place of employ-
Sale of a ment is considered to be the reason you sold a home if:
Principal Residence • The change occurred during the period the property
was used as a primary residence, and
• The new place of employment is at least 50 miles far-
Inherited home. If you inherit a home you are generally ther from your home than the former place of em-
not eligible for gain exclusion unless you meet the owner- ployment was. If there was no former place of em-
ship and use tests for the inherited home. ployment, the new place of employment must be at
least 50 miles from the home that was sold.
Sale of Vacant Land Adjacent to Residence 2) Health. You can claim a reduced exclusion if the pri-
mary reason for the sale is:
The sale of vacant land is not treated as a sale of your • To obtain, provide, or facilitate the diagnosis, cure,
principal residence unless: mitigation, or treatment of disease, illness, or injury of
• The vacant land is adjacent to your principal residence, a qualified individual, or
• You owned and used the vacant land as part of your • To obtain or provide medical or personal care for a
principal residence, qualified individual. The sale of a home is not because
• The sale of the principal residence satisfies the re- of health if the sale merely benefits a qualified indi-
quirements for exclusion and occurs within two years vidual’s general health or well-being.
before or after the sale of the vacant land, and 3) Unforeseen circumstances. The reduced exclusion
• The ownership and use requirements for the vacant rules do not apply if the primary reason for the sale was
land have been satisfied. a preference for a different home or an improvement in
If these requirements are met, the sale of the princi- household finances.
pal residence and the vacant land are treated as one Specific event safe harbors. Specific event safe harbors
sale. Only one maximum limitation amount of $250,000 include the following.
($500,000 for eligible MFJ) applies to the combined sales. • An involuntary conversion of the home.
• Natural or man-made disasters or acts of war or
Reduced Maximum Exclusion terrorism resulting in a casualty to the home.
• Events that apply to qualified individuals include
If you do not meet the 2-year ownership and use tests, death, unemployment (if the individual is eligible for
or you have already excluded gain from the sale of an- unemployment compensation), a change in employ-
other home during the 2-year period prior to the sale ment or self-employment status that results in an
of a current home, you may claim a pro-rated exclusion inability to pay reasonable basic living expenses, di-
on the sale of a home if the primary reason for the sale vorce or legal separation, or multiple births resulting
is due to: from the same pregnancy.
1) A change in place of employment of a qualified • Any event the IRS determined to be unforeseen.
individual,
2) The health of a qualified individual, or Facts and circumstances. If you do not meet the specif-
3) Unforeseen circumstances. ic event safe harbor rules you may still be able to claim
a reduced exclusion.
Qualified individual. For purposes of the reduced
maximum exclusion, a qualified individual is:
• You, Contact Us
• Your spouse, There are many events that occur during the year that can affect
your tax situation. Preparation of your tax return involves sum-
• A co-owner of the home, or marizing transactions and events that occurred during the prior
• A person whose primary residence is the same as year. In most situations, treatment is firmly established at the
yours. time the transaction occurs. However, negative tax effects can
be avoided by proper planning. Please contact us in advance
1) Change in place of employment. Employment in- if you have questions about the tax effects of a transaction or
cludes the start of work with a new employer, continu- event, including the following:
ation of work with the same employer, and the start or • Pension or IRA distributions. • Retirement.
• Notice from IRS or other
• Significant change in income or
continuation of self-employment. deductions. revenue department.
• Job change. • Divorce or separation.
This brochure contains general information for taxpayers and • Marriage. • Self-employment.
should not be relied upon as the only source of authority. • Attainment of age 59½ or 70½. • Charitable contributions
Taxpayers should seek professional tax advice for more information. • Sale or purchase of a business. of property in excess of
• Sale or purchase of a residence $5,000.
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