Does 2/5 house sale rule apply to easements?
Art Kamlet
main home that meets the 2/5 rule.
Can he apply the 2/5 rule and not declare the sale?
If two years pass without selling the home he is again
eligible to use the 2/5 rule. And if he sells before two
years pass can he amend to revoke use of the 2/5 rule and
claim profit on sale of easement?
--
Art Kamlet Columbus, Ohio kam...@infinet.com
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Drewremedy
> main home that meets the 2/5 rule.
>
> Can he apply the 2/5 rule and not declare the sale?
>
> If two years pass without selling the home he is again
> eligible to use the 2/5 rule. And if he sells before two
> years pass can he amend to revoke use of the 2/5 rule and
> claim profit on sale of easement?
My read is that it applies to the residence itself.
My guess is that if you sold the residence and at the same
time sold an easement in the same timeframe you might say it
was all part of the same overall transaction subject to the
some rule. Not two bites at the new apples.
Paul Thomas
> Taxpayer receives money for an easement which was part of
> main home that meets the 2/5 rule.
>
> Can he apply the 2/5 rule and not declare the sale?
I've ran in to this earlier, and since the "house" wasn't
sold, the partial land sale does not qualify for exclusion.
I'm at home this morning, but I'll see if I have the details
when I get to the office.
--
Paul A. Thomas, CPA
Athens, Georgia
tax...@negia.net
Michael T. Wing, CPA
> Taxpayer receives money for an easement which was part of
> main home that meets the 2/5 rule.
Actually, if I remember correctly, proceeds from the "sale"
of an easement can be treated as a "return of capital" until
the total basis in the land is recovered.
MTW
Please reply to newsgroup - unsolicited email ignored.
D. Stussy
> Taxpayer receives money for an easement which was part of
> main home that meets the 2/5 rule.
>
> Can he apply the 2/5 rule and not declare the sale?
>
> If two years pass without selling the home he is again
> eligible to use the 2/5 rule. And if he sells before two
> years pass can he amend to revoke use of the 2/5 rule and
> claim profit on sale of easement?
I would venture a guess that it does, but only 2/5 of the
exclusion would apply. I don't see any reason why this
would not apply to a residence or "any portion thereof" in
proportion. I have not researched the issue.
Ed Zollars
> Taxpayer receives money for an easement which was part of
> main home that meets the 2/5 rule.
Take a look at Revenue Ruling 70-510 and see if it
applies--if so, you would have a reduction in basis for the
property and *NOT* a gain on sale. In that case, the
Section 121 is rendered moot.
---
Ed Zollars, CPA Phoenix, AZ
ezo...@primenet.com
http://www.hmtzcpas.com
Art Kamlet
>> Taxpayer receives money for an easement which was part of
>> main home that meets the 2/5 rule.
> Actually, if I remember correctly, proceeds from the "sale"
> of an easement can be treated as a "return of capital" until
> the total basis in the land is recovered.
For easements seized through exercise of eminent domain I
can understand this logic. But for a "negotiated" sale
from, e.g., a competitive seller of cable services, I
thought it is handled as an actual sale?
--
Art Kamlet Columbus, Ohio kam...@infinet.com
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Michael T. Wing, CPA
> But for a "negotiated" sale
> from, e.g., a competitive seller of cable services, I
> thought it is handled as an actual sale?
I would certainly encourage adequate research with respect
to any particular situation. But, Rev Ruling 70-510
(mentioned by Ed) clearly stated that the easement was
entered into voluntarily and that condemnation would *not*
have resulted if the property owner had declined to
participate. The ruling held that the easement fee should
be treated as a reduction of basis. Cool!
MTW
Please reply to newsgroup - unsolicited email ignored.
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Art Kamlet
>> But for a "negotiated" sale
>> from, e.g., a competitive seller of cable services, I
>> thought it is handled as an actual sale?
> I would certainly encourage adequate research with respect
> to any particular situation. But, Rev Ruling 70-510
> (mentioned by Ed) clearly stated that the easement was
> entered into voluntarily and that condemnation would *not*
> have resulted if the property owner had declined to
> participate. The ruling held that the easement fee should
> be treated as a reduction of basis. Cool!
Mike & Ed: Many thanks
--
Art Kamlet Columbus, Ohio kam...@infinet.com
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