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INTERNAL REVENUE CODE 121 TAX EXEMPTION FOR SALE OF A PRINCIPAL RESIDENCE To qualify for I.R.S. Code 121 - The seller of a principal residence must have owned and occupied that residence an "aggregate" of two of the past five years - before the sale. Once qualified the seller can claim up to $250,000 of TAX EXEMPT PROFITS. Husband and wife - who both qualify - can claim up to $500,000 of TAX EXEMPT PROFITS if they file a joint tax return. Only one spouse needs to hold the title to qualify. Holding title in a living trust will also qualify. Code 121 includes deferred profits from previous principal residence sales under the now repealed "rollover residence replacement rule" of I.R.S. Code 1034. Homeowners who find they must sell their principal residence before meeting the two year minimum ownership and occupancy requirement may be eligible for a partial exemption - if job relocation or health problems are the reason for the sale - they may qualify for a partial exclusion. Check with your accountant to be sure you comply with the guidelines. I.R.S. Publication 523 contains worksheets for calculating partial exclusions due to short-term residency. There's no limit to the number of times the exemption can be used, however, it cannot be used more frequently than once every 24 months, except as outlined above. Treasury Decision 9030 clarifies a number of issues including exceptions to the two-year rules for use, ownership and claimed exclusion "safe harbors" when the primary reason for the sale is health, change in place of employment or "unforeseen circumstances". Treasury Decision 9030, the final home sale regulations, and T.D. 9031 are published in the Federal Register available at www.irs.gov or go to http://www.irs.gov/pub/irs-news/ir02-142.pdf Please note: This information is not intended to replace qualified tax or legal counsel. Each taxpayer should review his/her specific transaction with a tax or legal advisor of choice. :: SEARCH MLS :: ARIZONA ANALYSIS 05/27/2008 :: SCOTTSDALE :: CAVE CREEK :: FOUNTAIN HILLS :: PHOENIX :: TEMPE :: CHANDLER :: Testimonials :: REMEMBER :: SHORT SALES.... The Good, Bad & UGLY :: PERSONAL HOME SEARCH :: NEW HOME BUYERS BEWARE! :: Buyer's Resources :: Helping You Buy :: Finding Your Home :: Get a C.L.U.E. :: Mary's Marketing :: Why List with Mary? :: Helping you Sell :: Market Analysis :: I.R.S. Tax Code 121 :: Seller's Resources :: Planning Your Strategy :: Why Invest in AZ? :: I.R.S. Tax Code 1031 :: New Investor Counseling :: Investor Mentoring :: About Your Arizona Relocation :: Relocation Help :: Registration :: Arizona Trivia :: City Websites :: Valley Overview :: Why I Love AZ :: Mary's Resume :: The Buck Stops Here :: Contact Mary :: Guest Book :: Real Estate Resources :: Schools :: Newsletter :: Marketplace :: Library :: Glossary :: Weather :: Calculators :: Mortgage Rates :: Credit Report :: Commercial Loans :: 
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