[WSBAPT] Section 121 exclusion question

[Martin Silver]

I didn’t read this but I find Google it and you find others who have done some research.  https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=4110.    



From: Eric Reutter 
Sent: Thursday, April 13, 2017 4:02 PM
To: wsbapt at lists.wsbarppt.com 
Subject: [WSBAPT] Section 121 exclusion question

I have a question that involves the applicability of the IRC Section 121 exclusion. 

My question is this: Can the Section 121 exclusion be utilized even when the legal title holders have not been residing in the home as their primary residence? Specifically, what if the ones residing in the home have been the parties who, for all other purposes but legal title and the loan documents, have been acting as the homeowners? (i.e. the residents have made all the mortgage payments, property tax payments, and upkeep on the property).

Perhaps a simpler way of phrasing the question is this: if, for example, parents became the legal title holders of a home simply because their son could not qualify for the home mortgage, but all of the mortgage, upkeep, and tax payments have been made by the son, can either he or the parents somehow utilize the Section 121 exclusion when the home is sold?

There is still a mortgage on the property that likely contains a 'due on sale' clause, so I do not believe the parents in my hypothetical could quit claim the property to the son and therefore give him legal title before a sale is made. I am stuck therefore, wondering if the IRS perhaps recognizes a type of "equitable title" doctrine in the context of Section 121.

Curious if anyone has run into a similar situation before. Feedback is always appreciated.

Best regards,



Eric Reutter, Partner 
J.D., LL.M. Taxation
14205 SE 36th Street, Suite 100
Bellevue, WA 98006
(425) 298-7110 | appelgatereutter.com 


  



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