![]() According to the facts, when the house was purchased, the taxpayer expected that X would not live there permanently. While X was in rehab, the taxpayer bought a new house, which became the principal residence. X, a member of a taxpayer's family and an inhabitant of the taxpayer's house, was convicted of a crime, placed on probation and spent one year at a rehabilitation facility. In September 2003, the IRS addressed a unique set of facts, and ruled that they qualified for a partial exclusion. Under this category, the IRS has announced several safe harbors, such as natural or man-made disasters or acts of war or terrorism, death of the taxpayer, divorce or legal separation, and even multiple births resulting from the same pregnancy.Īccording to the temporary regulations, the IRS also can determine, case by case, whether a particular set of facts would qualify under the category of unforeseen circumstances. is the occurrence of an event that the taxpayer does not anticipate before purchasing and occupying the residence." * Sale because of unforeseen circumstances: This is a catchall, created by Congress to ensure that taxpayers will not lose the partial exclusion if "the primary reason for the sale. ![]() To be on the safe side - and to get the benefits of the safe harbor - it is advisable to obtain a physician's written recommendation for such a change of residence. The health problem can be that of the taxpayer, the taxpayer's spouse, or even the taxpayer's grandparents. * Sale for a health reason: If the primary reason for selling the family home is to "obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness or injury," the IRS will permit a partial exclusion for gain should the home be sold before the full two years. Also, if the taxpayer was previously unemployed and the distance between the new place of employment and the residence that was sold is at least 50 miles, he will qualify for the partial exclusion. * Change in place of employment: If the taxpayer's new place of employment is at least 50 miles farther from the principal residence than was the former place of employment, the IRS considers it to be a "safe harbor." This means that you will qualify for the reduced exclusion of gain. 24, 2002, the Internal Revenue Service issued temporary regulations to clarify and interpret the language of the code. is by reason of a change in place of employment, health, or to the extent provided in regulations, unforeseen circumstances." The law (Section 121c of the Internal Revenue Code) allows partial exclusions of gain where "such sale. The IRS calls this a "reduced maximum exclusion." ![]() ![]() Do we have to pay capital gains tax on the full profit because we have not lived there for the full two years?ĪIn your case, you will be able to exclude a portion of your gain. We have to sell our house and will make a considerable profit. My husband and I have lived in our house for almost one year, and he is being transferred to Ohio. QYou have written that if we live in our house for two out of the last five years before it is sold, we can exclude up to $500,000 of profit if we are married and file a joint income tax return. ![]()
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