Another silly tax question

[cute fuzzy bunny]

I'll probably find the answer to this one but in case someone else has experienced this and knows the answer off the top of their head...

While snooping tax code for home sales, I bumped into the one that says you cant exclude the gains on a sale of residence if you sell twice within a 2 year period. In other words, selling a home, excluding the gain, moving, and then selling again within 2 years would mean you could not exclude the gain on the second sale.

I sold my primary residence in ~September of 2003 and excluded a sizeable gain. I married my wife in August of 2004. We're selling her house right now, which will also sell at a sizeable gain.

Since her house is titled in her name only, and my old house was titled in my name only does that mean we've got no problems? Do we need to file separately? Do we need to wait until September of this year to sell without having to pay taxes on the gain?!?

I cant wait until theres a simpler tax system

 

[P.S.]

Your'e correct: One person can claim $250,000 /2y.

Or one married couple $500,000/2y.

But you have to admit TH, this is one of those nice problems to have.

Maybe you would decide when to sell based on capital gains?  If it's more than $250k, then wait.  If less, then let your wife claim it now, just in case you have another $250k gain in 25 mo.

 

[cute fuzzy bunny]

Well it took 3 IRS agents about 10 minutes of conferencing to decide, but the second gain is also excludable because we each hold title to our own homes individually, and we both satisfied the rest of the requirements. That we married within the two year waiting period was irrelevant.

Woo hoo!

 

[BUM]

I am preparing a tax reutrn for a deceased relative. My question was, who signs the return? Next of kin, attorney, executor? In this instance it is the exectutor. The IRS states it as "the person in charge of setteling the estate". To make it more complicated a refund is due...payable to whom? Again the person in charge of settling the estate (who swears by signature that the funds will be disbursed according to law).

Oh brother!


BUM

 

[Beachbumz]

Well it took 3 IRS agents about 10 minutes of conferencing to decide, but the second gain is also excludable because we each hold title to our own homes individually, and we both satisfied the rest of the requirements.  That we married within the two year waiting period was irrelevant.

Woo hoo!

TH, call them tomorrow and you will probably get a different answer. Amazingly, they gave you the correct answer on the first try, but this would keep them busy and maybe they would leave the rest of us alone.

Beachbumz

 

[retire@40]

I am preparing a tax reutrn for a deceased relative. My question was, who signs the return? Next of kin, attorney, executor? In this instance it is the exectutor. The IRS states it as "the person in charge of setteling the estate". To make it more complicated a refund is due...payable to whom? Again the person in charge of settling the estate (who swears by signature that the funds will be disbursed according to law).

Oh brother!


BUM

My first thought is if you can't figure out who should sign the return and to whom the refund should be payable, maybe you shouldn't be preparing the return in the first place.

You might be getting yourself into more trouble than you may expect. I would recommend having a local CPA take care of it for you.

 

[LovesLife]

I am preparing a tax reutrn for a deceased relative. My question was, who signs the return? Next of kin, attorney, executor? In this instance it is the exectutor. The IRS states it as "the person in charge of setteling the estate". To make it more complicated a refund is due...payable to whom? Again the person in charge of settling the estate (who swears by signature that the funds will be disbursed according to law).

Oh brother!


BUM

BUM,

Going by my own experience, the refund will be payable to the Estate. Have you set up a fiduciary account? You as the Executor sign your name followed by executor. It probably is a good idea to run it by your CPA, though.

LovesLife

 

[BUM]

My first thought is if you can't figure out who should sign the return and to whom the refund should be payable, maybe you shouldn't be preparing the return in the first place.

You might be getting yourself into more trouble than you may expect. I would recommend having a local CPA take care of it for you.

I did figure it out. I was trying to point out that even with something as simple as a signature, the IRS can make it a chore to research the answer.
PS Its hard to get into too much trouble doing taxes for the dead.


LovesLife,
A you might imagine the IRS has a form for everything. I think it was 1303 "Claiming refund for deceased Taxpayer".
BUM

 

[retire@40]

PS Its hard to get into too much trouble doing taxes for the dead.

What does the taxpayer being dead have to do with preparer penalties and/or being subject to civil action from the benefiaries of the estate for an incorrectly prepared tax return?

 

[Martha]

TH, your answer from the IRS was right, amazingly enough. I often like to first check to see if the situation is dealt with in a publication. www.irs.gov is fairly easy to search for publications on point. Publication 523 deals with sales of a residence. According to this pub, your wife can exclude up to 250,000.

Martha

 

[Martha]

Bum, I filed final year tax returns for my deceased father in law as executor. The refund check came payable to him. No big deal, it was just deposited in the estate account.

I also file tax returns for bankruptcy estates. Refunds come payable to me.

Really, the IRS should make refunds payable to the estates, whether it is the estate of the dead person or the bankruptcy estate.

Martha

 

[cute fuzzy bunny]

Yep 523 more or less gave me the basic rules, (which is where I found out the details on the other tax question regarding selling a 2 family).

What it didnt address was the complication of my selling a home at a gain as a single man, and then we as a married couple selling another one at a gain in less than the 2 year required waiting period.,

If they decided that my single sale and our married sale forced the 2 year waiting period for the second sale to be free of capital gains. It makes sense that it wouldnt because my home was titled in my name and hers in her name. I figured there might be some bizarre but acceptable complication such as requiring us to file separately next year when we report the sale, but according to these fine agents there is no problem or hitch whatsoever.

And you can bet your bippy that I got the agents name and ID number and recorded the time and date of the conversation, and had my wife listen in on the final finding with the agents knowledge that she was on the line.

Considering what time of the year it is, I was surprised to get someone as quickly as I did, just a 5-6 minute time on hold.

As far as not doing a tax return if you dont know something...heck...there are all kinds of elements to the tax code that I havent run into. While its sage advice to get a CPA involved if its anything complex, I'm still a believer in DIY if at all possible, even if it involves taking a shot at it and then bringing in a pro later. In BUM's case, if he's familiar with doing a moderately complex return and the only hitch is the one he mentioned, a little reading on the appropriate pubs and maybe a call to the IRS should straighten out the questions.

Once again I mutter "why cant this tax thing be any simpler...?" under my breath...

 

[Martha]

Pub 523 says on page 9 that you can claim 500,000 exempt if you are (1) married filing jointly (2) either spouse or both spouses own the home (3) both used for two of last five years, and (4) neither spouse in the last 2 years sheltered the gain from the sale of a different home. TH's question is answered in the next paragraph where the publication states that if either spouse doesn't satisfy all theabove tests, then the maximum exclusion is the total that each spouse could claim if not married. TH could claim 0 and his wife 250,000 if they weren't married.

Not to be argumentative , but I would say pub 523 answered TH's question.

Even if you got the name of the IRS person who gives you a wrong answer, the IRS has said in the past that you cannot rely on answers of its agents, unless you get a private letter ruling, and you still will have to pay interest (and maybe penalties) on underpayments that are discovered in the future, even if the agent was wrong.

Martha

 

[John Galt]

Asking the IRS about anything is just a waste of
time. Tried it many times. Never got anything I could use.

JG

 

[cute fuzzy bunny]

Dang it and I read the thing and didnt see that.

But then again I dont have the attention span to watch a fat kid sing on his web cam for more than 15 seconds.

Thanks Martha.

Johnny...I got a good answer from them, and the guy had a heck of a sense of humor as well.

 

[JOhn Galt]

Hi TH. Nice that you got a good result from an IRS
inquiry. Maybe I gave up too easily? Impatient............

JG