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We are 2 months shy of living in our home 2 years and

Customer Question
avoiding capital gains. I know...
We are 2 months shy of living in our home 2 years and avoiding capital gains. I know there are exemptions. I had twins that were 4 months old when we bought our home. Could that fall under multiple birth?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: We live in Idaho.
Submitted: 1 year ago.Category: Tax
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8/17/2016
Tax Professional: Barbara, Enrolled Agent replied 1 year ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,070
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Taxpayers who don’t meet the requirement to own and live in their homes for 2 of the 5 years immediately preceding the sale can qualify for a reduced exclusion under IRC § 121(c) if the sale or exchange is because of a change in place of employment, health or “unforeseen circumstances.”

Unforeseen circumstances are defined by Treas. Reg. § 1.121-3(e)(1) as events the taxpayer could not reasonably have anticipated before purchasing and occupying the residence. Specific-event safe harbors are provided in Treas. Reg. § 1.121-3(e)(2): involuntary conversion of the residence; disasters or acts of war or terrorism damaging the residence; or a qualified individual’s death, unemployment (if eligible for unemployment compensation), change in employment status that results in an inability to pay housing costs and basic living expenses, divorce or legal separation under a decree of divorce or separate maintenance, or a multiple birth. These, however, are hardly all the common life events that can result in the sale or exchange of a home, such as marriage, adoption or other circumstance that results in the addition of dependents to the family. Despite not being specified as safe harbor events, circumstances such as these and others may still qualify as unforeseen. Determining whether fact patterns exhibit the level of unforeseeability necessary to qualify as unforeseen circumstances requires taxpayers and practitioners to exercise their best judgment.

http://www.journalofaccountancy.com/issues/2009/nov/20091783.html

Unless the birth of your twins 4 months prior to the purchase is causing you to sell your home, that would not qualify as an unforeseen circumstance.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Tax Professional: Dr. Fiona Chen, Certified Public Accountant (CPA) replied 1 year ago
Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 482
Experience: Former IRS Revenue Agent
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Dear Customer,

Please see below. When the unforeseen circumstance is not standard, the IRS still allows for special circumstance. They are citation from the Publication 523. https://www.irs.gov/publications/p523/ar02.html.

Under special facts and circumstances, "The home became significantly less suitable as a main home for you and your family for a specific reason." is one element which may fit in your situation. When the two children are infants, their activities and needs may be very different and unforeseeable from when they are learning to walk, climb, and run. So, the house could become unfit and even unsafe for them. Then, it is significantly less suitable as a main home. Then, you should be able to take partial exclusion.

Please continue to see below.

Regards,

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

You may want to review all factors to make sure your circumstance fits or unfit all elements.

Showing facts and circumstances. If your circumstances do not match any of the standard requirements described above but based on facts and circumstances the primary reason for sale is work-related, health-related, or unforeseeable. Important factors are:

  • The situation causing the sale arose during the time you owned and used your property as your residence.

  • You sold your home not long after the situation arose.

  • You could not have reasonably anticipated the situation when you bought the home.

  • You began to experience significant financial difficulty maintaining the home.

  • The home became significantly less suitable as a main home for you and your family for a specific reason.

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Tax Professional: Barbara, Enrolled Agent replied 1 year ago

First expert here - while the IRS will consider "special circumstances," only you know how/if the birth of your twins caused you to sell your home 2 years after they were born, but less than the 2 years required for the sale of home exclusion.

Is there any way you can push the closing date back an additional 2 months?

There would then be no issue at all to claim the sale of home exclusion.

Best regards,

Barb

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Barbara
Barbara
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Category: Tax
Satisfied Customers: 4,070
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