Sec. 121 gain exclusion on sale of principal residence cannot be marked to market.
In Rev. Rul. 2001-57, the Service ruled that if an individual were to elect under Section 311(e) of the Taxpayer Relief Act of 1997 (TRA TRA Training
TRA Tennessee Regulatory Authority
TRA Telecommunications Regulatory Authority (Oman)
TRA Tax Reform Act (1976, 1984, or 1986)
TRA Teachers Retirement Association '97) to treat his principal residence as being both sold and reacquired on Jan. 2001 for an amount equal to its fair market value (FMV FMV - full-motion video ) on that date, he could not exclude the gain resulting from the deemed sale from gross income under Sec. 121.
Under Sec. 1(h)(2)(B) (as amended a·mend
v. a·mend·ed, a·mend·ing, a·mends
1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive.
2. by TRA '97 Section 311), for tax years beginning after 2000, the maximum capital gain rate for assets held more than five years was reduced from 20% to 18%. The 18% rate generally applies only to assets for which the holding period begins after 2000.
However, under Section 311(e)(1), a taxpayer may elect to treat any capital asset (other than readily tradable stock) or any property used in his trade or business and held on Jan. 1, 2001 as having been sold and reacquired on Jan. 1,2001 for its FMV on such date. (An election for readily tradable stock will result in the stock being treated as having been sold at its closing price on Jan. 2, 2001, then reacquired at that price.) Under Section 311 (e)(2), "[a]ny gain resulting from an election under [Section 311(e)(1)] ... shall be recognized notwithstanding any provision of the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. of 1986." Any loss resulting from such an election is disallowed. The election must be made on an asset-by-asset basis on the taxpayer's 2001 return, no later than six months after the return due date, without extensions. Once made for any asset, the election is irrevocable Unable to cancel or recall; that which is unalterable or irreversible.
IRREVOCABLE. That which cannot be revoked.
2. A will may at all times be revoked by the same person who made it, he having a disposing mind; but the moment the testator is .
Under Sec. 121, a taxpayer generally is able to exclude up to $250,000 ($500,000 if married filing a joint return) of gain realized on the sale or exchange of a principal residence. The exclusion is allowed each time a taxpayer selling or exchanging a principal residence meets the eligibility requirements, but generally no more than once every two years. To be eligible for the exclusion, a taxpayer must have owned the residence and occupied it as a principal residence for at least two of the five years before the sale or exchange.
The Service concluded that the Section 311(e) election not only confers tax benefits on the electing taxpayer (a holding period that begins in 2001 and a basis step-up step-up
A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. ), but also imposes a tax cost (i.e., current recognition of gain resulting from any existing appreciation in the asset). Therefore, excluding the gain from the deemed sale would frustrate the balancing of benefits and burdens. Citing the legislative history of Section 311(e), the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. ruled that the statutory requirement that gain be recognized notwithstanding any other Code provision precluded application of the exclusion from gross income under Sec. 121, because it prevented the intended consequences of the recognition (taxation of the gain).
FROM ROBERT Robert, Henry Martyn 1837-1923.
American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876).
Noun 1. COPLAN, WASHINGTON, DC