Relocation sales.

In Rev. [Ltd. 2005-74, the IRS analyzed three transactions to determine whether each was (1) a sale of an employee's home to his or her employer through a relocation management company, acting as the employer's agent, followed by a separate sale of that home by the employer to a third-party buyer; or (2) one sale of the home from the employee to the third-party buyer, facilitated by the employer through the relocation management company.

Conclusions: Applying a benefits-and-burdens analysis to the transactions, the Service determined that two of the transactions resulted in two separate sales of the home. However, in the third case, the IRS concluded that, for Federal tax purposes, there was one sale of the home from the employee to the third party, facilitated by the employer through its agent. As a result, the employee realized any gain on the sale under Secs. 1001 and 61(a)(3).

Any expenses paid by the employer, directly or through its agent (the relocation management company), including maintenance costs, taxes, insurance, losses and other costs associated with the home, were deemed paid on the employee's behalf by virtue of his or her employment. Consequently, any such amounts paid by the employer were taxable compensation to the employee under Sec. 61(a)(1).

Lesli S. Laffie, J.D., LL.M.