by John Darer CLU ChFC CSSC
The Housing and Economic Recovery Act of 2008 ("HERA") was signed into law on July 30, 2008. Included in HERA 2008 is an amendment to Internal Revenue Code Section 121 ("IRC 121") designed to preclude taxpayers from excluding the gain on the sale of a residence attributed to periods of "nonqualified use" (any period after 2008 when the residence is not used as a principal residence).
The purpose of the IRC 121 amendment was to close the loophole that permitted a taxpayer to sell a primary residence and utilize the full home sale capital gains tax exclusion ($250,000 for single, and $500,000 for married taxpayers); then convert an existing vacation or rental property into a primary residence, satisfy the two of the five year residency requirement, and then sell the new primary residence and again utilize the full home sale capital gains tax exclusion.
The closure of the loophole means an added capital gains exposure which may be mitigated through the use of a structured installment sale (a/k/a "structured sale). Click here for a structured sales flow chart.
"When One Door Closes, Another Opens..."
For more information about structured installment sales please contact John Darer at 888-325-8640
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