Yesterday TaxMama responded to Keith in Wisconsin, who wanted to sell his home and an adjacent lot that he had paid to subdivide. Keith asked about his options when it came to selling the lots, together or separately.
When I answered him, I suggested that he might want to keep an eye out on TaxMama’s Parlor for tips from the Pros.
Well, folks, they did come through! Not everyone was able to log in, so they sent me their notes. Responses came to us from Donald Hood III, EA of Charlotte, NC, Roger Adams, EA of Portugal,
and Carol Lawlor, CPA of Murrells Inlet, SC. All of them agree that the house and lot may be sold in separate transactions, and still qualify for the personal residence exclusion, as long as they are sold within two years of each other.
In other words, the house may be sold 2 years before OR after the sale of the land.
Some of them cited IRS Publication 523, where it does explain. Carol Lawlor provided a link to the Federal Register, Tuesday, 12/24/02, vol 67 no 247 page 78359; Rules and Regulations, item b. which you can find right here if you want to read the discussion and the current version of the regulations for IRC section 1034 – which came about due to Tax Court cases.
Interesting stuff. And it looks like, in this case, you may have two sales within a year and still qualify for the personal residence exclusion – assuming that you stay within the overall exclusion limit for both sales combined – $250,000 single, or $500,000 married – or $250,000 per owner who resided in the house for two years.
And remember, you’ll find answers to questions about capital gains and all kinds of tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
To make your comments, please visit TaxMama’s Parlor at TaxTwist.com.
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxQuips #229 :: Subdivided Personality
- Federal Register :: Regarding discussion of Sec 1034 sales of home and lot