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Personal residence gain exclusion: unforeseen circumstances safe harbors.
Tax Adviser, The, September, 2005 by Hildabridle, Nick H.F.; Miller, Sami D.T.
Under Sec. 121(a) and (b), taxpayers can exclude up to $250,000 of the gain on the sale or exchange of their principal residence ($500,000 for certain joint returns). However, they must have owned and used the property as a principal residence for at least two of the previous five years ending on the sale or exchange date. Also, under Sec. 121(b)(3), taxpayers can use this exclusion only if they have not used it in the last two years.
Background
On Aug. 13, 2004, the IRS issued final regulations on (1) the gain exclusions and (2) Sec. 121(c)'s special rules for taxpayers who do not meet the two-out-of-five-year test or the two-year limit. Under the latter provision, taxpayers may still qualify for a reduced maximum exclusion if the sale or exchange...
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