Guinan vs United States (IRC Sec. 121, Sale of Main Home)


A.G. Kalman

For those of you who have clients that live in multiple
homes, you may want to read the Arizona District Court case
Guinan vs United States, CV 0200261-PHX-PGR (DC AZ 2003).
(Please note that the district court has not posted this
decision on its website.) For those of you who subscribe to
Tax Notes or Tax Practice from Tax Analysts, they have the
Burgess & William Raby analysis of the case.

WIthout going into a lot of detail, the judge ruled that
none of 3 homes that the Guinan's owned during the 5 year
look back period under Sec. 121, were their principal
residence and therefore the Guinan's could not exclude the
capital gain on the sale of their Wisconsin property from
taxation. The judge held that for purposes of Sec. 121,
none of the 3 homes qualified as their main home even though
they occupied one of those homes for 847 days during the 5
year period. The actual count was: 847 days in the
Wisconsin home for which they claimed the tax exclusion, 563
days in a Georgia home and 375 days in the current home in
Arizona. The judge relied upon the language in the Sec 121
regs and said that one must first determine which home is
the principal residence and that this determination must be
made year by year. You could not make the determination by
aggregating years. In addition, the judge said that
occupancy is only one factor in determining which home is
the principal residence. All facts and circumstances must
be used to determine which home meets the definition. This
would include other factors such as: addresses listed on tax
returns, driver's licenses, automobile registration, voter
registration, bill and correspopndence; location of bank;
and location of religious and recreational organizations to
which the taxpayer attends or belongs.

After reviewing all the facts, the judge determined that
none of the residences met the definition of being their
principal residence (main home). So, even though the
Wisconsin home met a 730 day occupancy test, it did not meet
the 730 day use test as the main home because a principal
residence is not necessarily the home you occupy most of the

One can also conclude from this District Court opinion, that
it is possible that anywhere from zero to two homes could
meet the test during a 5 year lookback.



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