Washington (Dec. 24, 2002) -- The Internal Revenue Service has issued both final and temporary regulations related to excluding gain on the sale of a principal residence.A 1997 law substituted an exclusion of up to $250,000 ($500,000 for a married couple filing jointly) for the old "replacement residence" rules. Unlike the previous once-in-a-lifetime exclusion for senior citizens, the new exclusion may be claimed repeatedly, but usually only once every two years.

The final regulations cover such topics as:

• how to determine if a home is a principal residence;

• when gain from the sale of vacant land that was used as part of the residence may be excluded;

• when and how to allocate the gain between residential and business use of the property;

• how the exclusion applies to joint owners who are not married; and

• how to fulfill the requirement that the taxpayer own and use the home as a principal residence for two of the five years before the sale.

For taxpayers with multiple homes, the regulations list several factors relevant to determining which home is the principal residence. Among these are amount of time used; place of employment; where other family members live; the address used for tax returns, driver's license, car and voter registration, bills and correspondence; and the location of the taxpayer's banks, religious organizations or recreational clubs.

-- Electronic Accountant Newswire staff

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access