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Greetings,

Facts:

4+/- years ago, 60+/- year old children move in with elderly parent 90+/- just after death of spouse of elderly parent, at elderly parents request to take care of elderly parent to keep them out of nursing home.

Fast forward 4 +/- years. Children are now preparing to retire, want to sell there home of 25+ years to offspring and move to FL. Taking elderly parent with them. Offspring has been living in the house rent free for 4 years and is prepared to purchase.

They had every expectation of moving back home, that's why it was never sold, just didn't realistically expect elderly parent to live this long.

Questions:

Have the children blown their exclusion by moving in with elderly parent and staying as long as they did?

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Facts:

4+/- years ago, 60+/- year old children move in with elderly parent 90+/- just after death of spouse of elderly parent, at elderly parents request to take care of elderly parent to keep them out of nursing home.

Fast forward 4 +/- years. Children are now preparing to retire, want to sell there home of 25+ years to offspring and move to FL. Taking elderly parent with them. Offspring has been living in the house rent free for 4 years and is prepared to purchase.

They had every expectation of moving back home, that's why it was never sold, just didn't realistically expect elderly parent to live this long.

Questions:

Have the children blown their exclusion by moving in with elderly parent and staying as long as they did?


The rules are in IRS Publication 523. You have to own it and have lived in it for 2 of the last 5 years. The lived in is in bold on page 12 of the publication. Unless someone knows some other exception, I think they're out of luck.





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They may still be eligible for a pro-rated amount of excluded gains. Comes to about $10,000 per month for the time they were in the house during the 5-year period, if they qualify under the reasons they moved. Check Worksheet 3 on pate 13 of Pub 523 to figure the amount of excluded gain.
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Charlie48K:

<<<<Facts:

4+/- years ago, 60+/- year old children move in with elderly parent 90+/- just after death of spouse of elderly parent, at elderly parents request to take care of elderly parent to keep them out of nursing home.

Fast forward 4 +/- years. Children are now preparing to retire, want to sell there home of 25+ years to offspring and move to FL. Taking elderly parent with them. Offspring has been living in the house rent free for 4 years and is prepared to purchase.

They had every expectation of moving back home, that's why it was never sold, just didn't realistically expect elderly parent to live this long.

Questions:

Have the children blown their exclusion by moving in with elderly parent and staying as long as they did?>>>>

"The rules are in IRS Publication 523. You have to own it and have lived in it for 2 of the last 5 years. The lived in is in bold on page 12 of the publication. Unless someone knows some other exception, I think they're out of luck."

Is moving back to home for 1+ years to satisfy the requirement of 2 of the last 5 years out of the question?

Put a pencil to paper and figure out cost to you of 20% of gain versus delaying move to sunny Florida for roughly 2 years (or slightly less).

Regards, JAFO









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Is moving back to home for 1+ years to satisfy the requirement of 2 of the last 5 years out of the question?

It will take staying in the house 2 years to get the full exclusion back. The prior year of residency would be disappearing as each day of new residency is added. So the total residency time would not begin increasing until after the fifth anniversary of their move out of the house. Bummer.

--Peter
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if they qualify under the reasons they moved.

To qualify for a reduced exclusion, a move can't be just any move. The move has to be due to a "change of place of employment." I'm not sure a move due to retirement would qualify as a change in place of employment.

--Peter
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Have the children blown their exclusion by moving in with elderly parent and staying as long as they did?

Probably. However, they might be able to sell a prorated exclusion to a sypathetic auditor who was in a good mood. Warning: what follows is pretty agressive.

The law says that a prorated exclusion applies if the move was due to a change in health, employment, or other unforeseen circumstances as prescribed by regulation. Since the IRS hasn't issued such regulations 4 years and counting after the law was enacted, I don't think it's totally unreasonable for people to start defining them for themselves.

Also, the law makes no connection between the home gain exclusion and the employment requirements for deductible moving expenses. Thus, if one of you spent a week as a Stepford Greeter at Wal-Mart in Florida, there you have a change in employment.

Phil Marti
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Probably. However, they might be able to sell a prorated exclusion to a sypathetic auditor who was in a good mood. Warning: what follows is pretty agressive.

The law says that a prorated exclusion applies if the move was due to a change in health, employment, or other unforeseen circumstances as prescribed by regulation. Since the IRS hasn't issued such regulations 4 years and counting after the law was enacted, I don't think it's totally unreasonable for people to start defining them for themselves.

Also, the law makes no connection between the home gain exclusion and the employment requirements for deductible moving expenses. Thus, if one of you spent a week as a Stepford Greeter at Wal-Mart in Florida, there you have a change in employment


They moved four years ago, and not (it would appear) to Florida. So it would be difficult to make a case that the sale was do to the move. But an equally aggressive but maybe quite reasonable approach might be to claim the 'children' were justing 'staying' with the folks and never did change their principal residence. So they would be entitled to a full exclusion.

Or sell the elderly parents place to the grandkids, and convert the childrens' house to a (real) rental. Or boot the grandkids ( who need to get real), do a couple of refis and wait for the inevitable.
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