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Subject:  Re: Credit where credit is due Date:  2/17/2001  1:36 AM
Author:  pmarti Number:  46627 of 127638

I think you don't remember that discussion because you weren't part of it. As I recall, a poster who participated in a qualified retirement plan happened to anticipate being in the magic $95,000-$100,000 AGI range and asked for suggestions. Phil (as TMFExRO) made the obvious suggestion that he put as much as possible into a Roth. I suggested the "loophole" that you exploited in last week's article.

Being part of the discussion doesn't necessarily help. I could have sworn it was JAFO who first brought this up. Glad to know it was you.

Back to the "shore sale," IIRC--not a safe bet; see above--Roy ultimately agreed with the conclusion that you couldn't combine the section 121 exclusion with the deemed sale. I also seem to recall that there was much discussion focused on the word "nothwithstanding," one of Congress' favorites.

When the issue came up within the last 6-8 weeks on the board, I tried in vain to find the original discussion. (Layoff benefit number two: I can now complain about the crappy search engine.) However, I do recall posting in that thread, in response to a "what's the harm?" question about going ahead and doing it, that there was the very real chance that the deemed sale would fly but the exclusion wouldn't, and you'd be faced with paying tax on the gain when the dust settled. IIRC, no one took issue with this response. (That means only what it says, not that I'm right.)

Also at that time I reviewed an extensive discussion on Usenet's misc.taxes.moderated (available at from a search for "121" in the indicated forum--their search engine is nifty). That group is frequented by some very knowledgeable people, just like this one. The bottom line there was no firm consensus, but there was an indication that someone had gotten an informal, a/k/a worthless, opinion from an IRS attorney that you could not combine the two provisions.

Yes, there really is a point to this ramble. I read Roy's article that sparked this thread, and he seems emphatic about the ability to combine the provisions. The only hint of a waffle was that Congress may step in. As a side note to that, I have a friend who works for Senate Finance, and I've written him about the confusion and the potential implications in high-appreciation real estate markets. Given my experience with the legislative process (see "sausage and laws"), I doubt Congress ever thought about it when they passed the deemed sale provision.

Anyway, back to the point. I know Roy's swamped with the tax seminar now, but we're under no time gun here. As noted many places, you don't have to make the deemed sale election until you file your 2001 return. When the dust settles and he has time to address it, probably not until after filing season and his subsequent rest cure, I'd really appreciate Roy's providing an analysis of how he reached his conclusion, one that specifically addresses the issues raised in the original thread.

Phil Marti

cc: TMF Taxes
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