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Richard
Richard, Tax Attorney
Category: Tax
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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If my primary home was damaged by flood 4 1/2 years ago and

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If my primary home was damaged by flood 4 1/2 years ago and I rebuild this year am I still eligible for capital gain exclusion. It was demoed and sat as vacent lot until I could afford to rebuild...never rented and owned property for 15years. It was a federal designated disaster.
Submitted: 7 months ago.
Category: Tax
Expert:  Richard replied 7 months ago.
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Expert:  Richard replied 7 months ago.
Yes, you would still be eligible for the exclusion. Specifically, Treas. Reg. § 1.121-3(e)(1) and (2) provide as follows: "(e) Sale or exchange by reason of unforeseen circumstances(1) In general. A sale or exchange is by reason of unforeseen circumstances if the primary reason for the sale or exchange is the occurrence of an event that the taxpayer could not reasonably have anticipated before purchasing and occupying the residence. A sale or exchange by reason of unforeseen circumstances (other than a sale or exchange deemed to be by reason of unforeseen circumstances under paragraph (e)(2) or (3) of this section) does not qualify for the reduced maximum exclusion if the primary reason for the sale or exchange is a preference for a different residence or an improvement in financial circumstances. 2) Specific event safe harbors. A sale or exchange is deemed to be by reason of unforeseen circumstances (within the meaning of paragraph (e)(1) of this section) if any of the events specified in paragraphs (e)(2)(i) through (iii) of this section occur during the period of the taxpayer's ownership and use of the residence as the taxpayer's principal residence:(i) The involuntary conversion of the residence.(ii) Natural or man-made disasters or acts of war or terrorism resulting in a casualty to the residence...." Thank you so much for allowing me to help you with your questions. I have done my best to provide information which fully addresses your question. If you have any follow up questions, please ask! If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service as OK, Good or Excellent (hopefully Good or Excellent). Otherwise, I receive no credit for assisting you today. I thank you in advance for taking the time to provide me a positive rating!

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