A
Alan
The US Tax Court rendered a decision (see below for link) that includes
a definition of the terms "property" and "principal residence" as it
relates to IRC Sec. 121 exclusion of gain on the sale. Briefly, they
ruled that a couple who elected to demolish a home that would otherwise
have qualified for exclusion, and build a new home on the site of the
old home, was not entitled to exclude gain on the sale because they sold
the home before they ever established it as their principal residence
(they never moved into it). The court determined that the IRC section
was ambiguous because property and principal residence were not defined.
I advise all to read it. Be sure to read the dissenting opinion that
five judges agreed to.
Let's hope that the plaintiffs have the resources to appeal this
decision as it 1. places limits on who qualifies for the exclusion and
2. leaves open some thorny issues relating to homes demolished by
natural disasters.
http://www.ustaxcourt.gov/InOpHistoric/Gates.TC.WPD.pdf
a definition of the terms "property" and "principal residence" as it
relates to IRC Sec. 121 exclusion of gain on the sale. Briefly, they
ruled that a couple who elected to demolish a home that would otherwise
have qualified for exclusion, and build a new home on the site of the
old home, was not entitled to exclude gain on the sale because they sold
the home before they ever established it as their principal residence
(they never moved into it). The court determined that the IRC section
was ambiguous because property and principal residence were not defined.
I advise all to read it. Be sure to read the dissenting opinion that
five judges agreed to.
Let's hope that the plaintiffs have the resources to appeal this
decision as it 1. places limits on who qualifies for the exclusion and
2. leaves open some thorny issues relating to homes demolished by
natural disasters.
http://www.ustaxcourt.gov/InOpHistoric/Gates.TC.WPD.pdf