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Married.
Purchased home #1 6-30-94
Sold home #1 3-31-98 due to job relocation.
Rolled entire gain into purchase of home #2 on 10-31-98.
Now, want to sell home #2 and not pay capital gains. This sale will not be due to relocation.

If I sell prior to 10-31-00, Do I qualify for the "Reduced Maximum Exclusion" mentioned in IRS publication 523? I base this on exception #2 under "Reduced Maximum Exclusion". Or, would selling after 3-31-00 allow me to be eligible for the "Maximum Exclusion" or do I just have to wait till after 10-31-00 to be eligible for the maximum exclusion?

IF I'm not eligible for the reduced maximum exclusion it seems like I am penalized because the first sale was due to a relocation but not the second. If it was vice-versa on cause for sale I'd be okay.

Thanks for your help.

gea001
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<< Married.
Purchased home #1 6-30-94
Sold home #1 3-31-98 due to job relocation.
Rolled entire gain into purchase of home #2 on 10-31-98.
Now, want to sell home #2 and not pay capital gains. This sale will not be due to relocation.

If I sell prior to 10-31-00, Do I qualify for the "Reduced Maximum Exclusion" mentioned in IRS publication 523? I base this on exception #2 under "Reduced Maximum Exclusion". Or, would selling after 3-31-00 allow me to be eligible for the "Maximum Exclusion" or do I just have to wait till after 10-31-00 to be eligible for the maximum exclusion? >>

You have to wait until you've owned and lived in the home for 2 years since you don't meet any of the qualifications for the reduced exclusion. It may seem unfair, but it's the law, and it was the law when you bought your current home.

Phil Marti
Tax Preparer
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<<Now, want to sell home #2 and not pay capital gains. This sale will not be due to relocation.>>

As Phil points out, since the move is not for medical or business circumstances, there is not partial exclusion for you.

The code mentions "unforeseen circumstances" that might also apply. But the IRS hasn't issued regulations that would define what these circumstances might be?

Are these "unforeseen circumstances" still in play without the regulations? I'm not sure. But if you do a word search of this message folder you can read more about what I have to say on the issue. I also discuss this subject in my series of articles on the home sale exclusion in the Taxes FAQ area.

TMF Taxes
Roy
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You said "Rolled entire gain into purchase of home #2 " in 1998. There's a chance you're much better off than you think. Under 1998 rules, "rolling the gain" isn't the thing to do anymore.

If you are considering the gain on house #1 to be "deferred" and therefore adding it into the taxable gain on house #2, today is your lucky day. Because it's not added.

But if your reference to "rolling" a gain in your post was just a casual reference, and didn't mean that you added the gain from the former to the gain on the latter, let's just say I tried to help. If it's going to be a taxable gain, I hope it's a big gain, so you have many $$$ left after you pay the tax.

FOOLishly trying to help,

LoTax
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<< If you are considering the gain on house #1 to be "deferred" and therefore adding it into the taxable gain on house #2, today is your lucky day. Because it's not added. >>

GREAT point. I'm so glad you caught it. There was something nagging at me about that "rolled" statement when I was answering this, but I couldn't put my finger on it.

Phil Marti
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