Capital Gains RevProc2005-14

Capital Gains RevProc2005-14 - Revenue Procedures Rev Proc...

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Unformatted text preview: Revenue Procedures Rev. Proc. 2005-14, 2005-7 IRB 528, 01/27/2005, IRC Sec(s). 121 Exclusion of gain from sale of principal residence—single exchange of like-kind property. Headnote: IRS offered guidance to taxpayers who exchanges single property that meets requirements for gain exclusion under Code Sec. 121; and non-recognition of gain on like-kind exchange under Code Sec. 1031; . Specific computation directions were provided: Code Sec. 121; must be applied before Code Sec. 1031; , followed by application of Code Sec. 1031; to gain attributable to depreciation, with boot to be taken into account only to extent boot exceeds gain excluded under Code Sec. 121; with respect to relinquished business property. Guidance was also provided computing basis, and hypothetical illustrations were given. Reference(s): ¶ 1215.01(20); Code Sec. 121; Code Sec. 1031; Full Text: 1. Purpose This revenue procedure provides guidance on the application of §§ 121 and 1031 of the Internal Revenue Code to a single exchange of property. 2. Background .01. Section 121(a) provides that a taxpayer may exclude gain realized on the sale or exchange of property if the property was owned and used as the taxpayer's principal residence for at least 2 years during the 5-year period ending on the date of the sale or exchange. Section 121(b) provides generally that the amount of the exclusion is limited to $250,000 ($500,000 for certain joint returns). Under § 121(d)(6), any gain attributable to depreciation adjustments (as defined in § 1250(b)(3)) for periods after May 6, 1997, is not eligible for the exclusion. This limitation applies only to depreciation allocable to the portion of the property to which the § 121 exclusion applies. See § 121-1(d)(1). .02. Section 121(d), as amended by § 840 of the American Jobs Creation Act of 2004, Pub. L. 108-357, provides that, if a taxpayer acquired property in an exchange to which § 1031 applied, the § 121 exclusion will not apply if the sale or exchange of the property occurs during the 5-year period beginning on the date of the acquisition of the property. This provision is effective for sales or exchanges after October 22, 2004. .03. Under § 1.121-1(e) of the Income Tax Regulations, a taxpayer who uses a portion of a property for residential purposes and a portion of the property for business purposes is treated as using the entire property as the taxpayer's principal residence for purposes of satisfying the 2-year use requirement if the residential and business portions of the property are within the same dwelling unit. Rev. Proc. 2005-14, 2005-7 IRB 528 -- IRC Sec(s). 121; 1031, 01/27/2005 Revenue Procedures (1955 - Present) Page 1 of 8 Document Display 11/2/2005 The term “dwelling unit” has the same meaning as in § 280A(f)(1), but does not include appurtenant structures or other property. If, however, the business portion of the property is separate from the structures or other property....
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This homework help was uploaded on 04/09/2008 for the course ACCT Acct 308 taught by Professor Lau during the Summer '06 term at CSU Fullerton.

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Capital Gains RevProc2005-14 - Revenue Procedures Rev Proc...

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