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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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My husband and I sold part of our yard back in Dec. of 2006

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My husband and I sold part of our yard back in Dec. of 2006 and paid a "capital gains tax." We were told by the tax preparer that we could get the money back if we sold our primary residence within two years of the sale of the land that was once attached. Just as we planned to put our house on the market, my husband was deployed to Iraq that following June, 2007. I was advised by the army's "Family Rediness Group" not to do anything major while he was away and to wait a little while after he returned in order to help him transition from being in a war zone for a year. Bob returned in June of 2008. We decided to put our house on the market, that October and the dead line by that point was approaching (Dec.2008). The house didn't sell until just this month (March) and we have lost our opportunity to get the money back. We feel that there should be some kind of extension for soldiers that were at war for half of that time period. Is there anything we can do to get the money back?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

Dear Johick,

 

I do not know all the details of your husband's deployment or living arrangements.

 

However, generally, military members get to disregard up to 10 years of he qualifying period for the capital gains exclusion. Read this: http://www.irs.gov/pub/irs-news/ir-03-132.pdf

 

This disregarded period, however, is not explicitly applied to a situation where you sold a part of your property.

 

Having spent 28 years in the military, during my prior career, I can tell you that the "Family Readiness Group" is not supposed to give direct tax advise, and they may have lead you astray. Family Readiness should have been advising to not do any big decisions "alone" while he was away. The issue is related to family integration and re-integration after a long period of separation. I ran a Family Readiness Group for over a year, and help at the one in Ft. Dix. We focus on not doing major decisions without the husband, while he is away. That did not preclude the two of them making plans and letting the wife implement them accordingly in his absence.

 

What this means is that you may have received bad advise from the Family Readiness.

 

Lets put that aside however, for now.

 

What you will need in this circumstance is one of two approaches.

 

1. File the return as if the sale occurred implementing the rule for disregarding the qualifying period for the capital gains exclusion, and apply it to the two year rule for selling your house. that is disregarding the period of his deployment, and treat it as if the sell was on time. If the IRS disagrees with this, they will contact you, and you can then offer an explanation regarding the rules for disregarding. If they accept your explanation, then you are ok. If they do not, then you can still appeal to the tax court. The IRS will provide appeal instructions. Your husband's JAG should be able to provide legal support for filing such appeals. The JAG is the IRS VITA for military services.

 

2. You can apply for a private letter ruling to the IRS to determine before filing or after filing, if the rules to allow soldiers to suspend the waiting period, also applies to the rule to sell the home and include the attached land sold separately. Again, the JAG should be able to help you with writing up the private letter ruling. http://www.irs.gov/faqs/faq/0,,id=199552,00.html

 

 

 

 

 

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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