At times, taxing authorities give out surprising beneficial rulings. The only problem is, you must ask for the ruling. For example, there was my October 24, 2006, WebCPA column about an advisory opinion issued by the New York State Department of Taxation and Finance.It answered the following question: Are you taxed as a New York resident if you move into a New York nursing home for care because you are incompetent and in need of constant medical supervision? According to the opinion, the individual, lacking intent to move, remained a resident of Florida despite the move to a New York nursing home for care.

Now there is a ruling from IRS. An unmarried couple purchased a home as their principal residence. Approximately seven months after the purchase, one of the individuals discovered she was pregnant. She and the father of the expected child are no longer in a relationship. The unmarried couple is planning to sell the residence, and find separate residences because the current one isn’t large enough to accommodate two adults and a child, and neither can afford to make the monthly mortgage payments.

In Ltr. Rul. 200652041, IRS ruled that the primary reason for the sale of the residence would be considered an unforeseen circumstance. Thus, if the couple sells the residence after they have owned and used it as their principal residence for less than two of the preceding five years, they may exclude gain up to the reduced maximum exclusion amount under Section 121(c).

These rulings illustrate that if there is no direct authority on point, and even if doubtful of the result, the easiest thing to do might be to simply ask the taxing authorities. Every once and awhile, I expect you will pleasantly surprised.

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