Authorities Section 82 Section 132a6 Section 162 Section 1001a Section 1011

Authorities section 82 section 132a6 section 162

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Authorities: Section 82. Section 132(a)(6). Section 162. Section 1001(a). Section 1011. Section 1221. Rev. Rul. 2005-74, 2005-51 IRB, 1153. Rev. Rul. 82-204, 1982-2 C.B. 192. Corn Products Refining Co. v. Comr., 350 U.S. 46 (1955). Conclusion: The transaction is treated as two sales. The first is a sale from the employee to the employer. The second is a sale from the employer to the purchaser. Because the homes are not purchased in the ordinary course of Vertovec’s trade or business the losses are capital in nature. Analysis: The primary question for Vertovec is whether it becomes the owner of the residential property or is simply a facilitator of the sale for the employee. Rev. Rul. 82-204 held that homes purchased under a home-buying plan by the employer , to assist its relocating employees were purchases and subsequent sales. The decision also notes that the residence was not held in the taxpayer’s ordinary course and did not meet the scope of exceptions contained in section 1221 as indicated in Corn Products and should be 10-11
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Topic 9 - Property: Dispositions classified as a capital asset. As a result, the capital gain or loss is amount realized under section 1001 reduced by the taxpayer’s basis (section 1011). Rev. Rul. 2005-74 clarified the situations in which the transfer of the residence was considered a sale between the employee and employer and when the employer’s expenses were deductible. Given the similarity between Vertovec’s facts and Scenario 1 of Rev. Rul. 2005-74, Vertovec’s losses will be capital in nature. Notwithstanding this recommendation, if the arrangement could be modified similar to Scenario 3 Rev. Rul. 2005-74 so that the benefits and burdens of ownership did not pass to the employer the expenses could be deducted as ordinary expenses under section 162. Section 162 allows employers to deduct moving expense reimbursements as an ordinary, necessary, and reasonable business expense. Employees must include in income amounts received as moving expense reimbursements under section 82 unless the amounts are specifically excluded from income under section 132(a)(6). 10-12
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