Temporary move abroad affects home-sale tax break

DEAR BOB: My son and I have owned our home where we havelived together since June 2006. It has been our plan to sell it in July 2008and make a nice profit so each of us can take advantage of the $250,000home-sale tax exemption. However, his employer might send him to Afghanistanfor a full year in January 2007. How will that affect our plan to sell in 2008?–Mr. J.M.

DEAR MR. J.M.: As you probably know, Internal Revenue Code121 provides a principal-residence home-sale tax exemption up to $250,000 ifyou own and occupy your home at least 24 of the last 60 months before its sale.

Purchase Bob Bruss reports online.

When your son moves out in January 2007 for a long-term jobin Afghanistan, he will lose his full eligibility for his $250,000 exemption.Of course, you will retain your full eligibility if you stay in the house asyour principal residence for the required time.

If you and he proceed with the plan to sell the house inJune 2008, your capital gain up to $250,000 will be tax-free, but your son’sshare of the capital gain will be taxable.

However, your son can probably qualify for the”unforeseen circumstances” job transfer exception to IRC 121 becauseof his overseas job transfer. But that won’t help him much because it willentitle him only to a partial exemption based on the number of qualifyingmonths he actually lived in the home.

If he lives in the home for only six months, plus a possibleadditional six months when he returns in a year from Afghanistan and againlives in the home, he will be entitled to a partial tax exemption based on hisactual months of occupancy. With six months of eligibility, that’s a 25 percentof $250,000 exemption; with 12 months of total eligibility, that’s a 50 percentexemption. For full details, please consult your tax adviser.


DEAR BOB: You always advise to list a home for sale with anagent for 90 days. But in my local market the average time on the market forhomes is eight to 12 months. No “top agents” in our market will takeless than an eight-month listing. The only agents who will take 90-day listingsare the new agents or those who don’t advertise much. What should we do? Thefirst month or two a home is on the market is so important –Jeff V.

DEAR JEFF: I can’t tell from your e-mail where you live, butI am not aware of any large markets where the average days on market for homesis eight months. Somebody is misleading you.

If an experienced residential sales agent can’t get yourhome sold within 90 days, presuming you price it correctly at market value andit is in good condition, you don’t want to hire that agent. It sounds like youhave been talking with some bad agents.

Don’t be fooled by averages. The “days on market”varies widely, depending on neighborhood and price range. Be sure to seriouslyinterview at least three successful agents who sell homes in your vicinity andin your price range.

Phone their recent sellers within the last three months toask, “Were you in any way unhappy with your agent and would you listanother home with the same agent again?”

If the best agent you can find insists on a listing longerthan 90 days, be sure that listing includes an unconditional cancellationclause at no charge to you after 90 days (just in case you select a bad agent).


DEAR BOB: My husband and I own our house were we have livedfor more than 30 years. We put it on the market for sale last May. So far, ithasn’t sold yet. Two years ago we built a new home where we want to live, as weare now retired. If we move into our new home as our primary home, can we stillclaim the $500,000 exemption ($250,000 for each of us) when our old home sells?Does it matter if we move in 2006 or 2007? –Maxine B.

DEAR MAXINE: Presuming you meet the Internal Revenue Code121 principal residence ownership and occupancy test for at least 24 of thelast 60 months before your old home’s sale, go ahead and move into your newhome whenever you wish.

It doesn’t matter whether you move in 2006 or 2007. Just besure to sell the house within 36 months after moving out (presuming you ownedand lived in it the previous 24 months). For full details, please consult yourtax adviser.

The new Robert Bruss special report, “How to BuyFixer-Upper Houses with Little or No Cash for Fun and Fortune,” is now availablefor $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit cardat 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

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