Here’s How To Transfer Your Low Property Taxes To Your Next Home!
Ira & Carol Serkes RE/MAX Executive 1758 Solano Avenue Berkeley, CA 94707 510 – 526 – 6668 www.berkeleyhomes.com Here’s How To Transfer Your Low Property Taxes To Your Next Home! Ira & Carol Serkes Executive 510-526-6668 serkes@berkeleyhomes.com www.berkeleyhomes.com Web Site www.berkeleyblogcast.com Blog & Podcasts We’re Ira & Carol Serkes... Full service RE/MAX Executive Realtors who specialize in helping nice folks sell and buy wonderful homes in the East Bay’s most livable neighborhoods. We welcome and value referrals of friends and family. The National Association of Realtors reports that over 77% of buyers search for homes online... and that multiple photographs and detailed property information are the two most valuable features home buyers want. That’s why we create custom web sites for our home sellers, with extensive photo portfolios, detailed home information, comprehensive neighborhood links, QuickTime Video interviews and superb web site placement on both Google and Google Blog Search. Want to know what your home is worth? comparative–market–analysis.com will send a report directly to your inbox. Need immediate service? Call us 510-526-6668 or Ira’s cell phone 510684-3334. Interested in selling or buying a fine home? berkeleyfinehomes.com is where to go. Ira Serkes is a founding member of The Institute for Luxury Home Marketing, and co-author of Get the Best Deal When Selling Your Home: San Francisco Bay Area Edition and Nolo Press’ best selling book How to Buy a House in California! Want to see what’s for sale right now? berkeley-real-estate.com has up-to-date listings! Curious about hot real estate topics and local neighborhood information via web, blog and podcasts? Visit berkeleyhomes.com and berkeleyblogcast.com Property Tax Relief: Are You A Qualified Seller? A special program lets qualified California sellers transfer their Proposition 13 assessed value to a replacement home. This program can save you thousands of dollars in taxes every single year! You’ll be able to move closer to family, friends, transportation, or shopping, and retain the same low property tax base of your current home! Did You Recently Purchase Your Replacement Home? You still might be able to take advantage of this program! Act quickly, though ..... there are strict deadlines involved. Important Factors In Determining Eligibility: Your Age And Disability Status County In Which You Purchased Your Replacement Home Price Of Original Home And Replacement Home Time Period In Which You Bought And Sold Ira & Carol Serkes Executive Toll Free 800.887.6668 or 510.526.6668 BerkeleyHomes.com & BerkeleyBlogCast.com Serkes@BerkeleyHomes.com Here’s A Quick Qualification Summary Your county’s tax assessor is responsible for the transfer of property tax base program and you should contact that office to be sure of the details. To aid you in learning more about current terms and conditions we’ve included a report from the Alameda County Assessor’s Office. Note that: 1: At least one seller of the original home must be at least age 55, or severely and permanently disabled; 2: Generally, this is a one-time benefit. Sellers of an original home must not have been granted program benefits prior, unless they became eligible based on attaining the age of 55 and then subsequently became disabled. In that case, a seller may qualify for a second claim based on their disability status; 3: Your replacement home must be purchased or newly constructed within two years, either before or after the sale of your original home; Wow! If you bought your replacement home within the last two years, you may still qualify! Be sure to contact your assessor’s office immediately: you must submit your claim within three years of your sale. 4: Your replacement home must be of “equal or lesser value” than your original home: Watch out: “equal or lesser value” requires careful determination: more about that in the following pages. 5: Your replacement home must either be within the same county as the original home you sell, or in one of the following seven counties; throughout this report, we’ll refer to them as the “Magnificent Seven”! In Northern California: In Southern California: Alameda, San Mateo & Santa Clara Los Angeles, Orange, San Diego & Ventura County Eligibility Requirements Every California county allows you to retain your tax base if you move within the same county and meet all other criteria! You CAN: Transfer Your Assessed Value When You: Sell your large home in the Berkeley Hills (Alameda County) and move to a less expensive, smaller home within walking distance of the Cheese Board Pizza (the world’s best!) in North Berkeley (Alameda County); Move from Kensington (Contra Costa County) to Rossmoor’s retirement community in Walnut Creek (Contra Costa County) to be closer to friends living there, and near your three grandchildren living in Moraga (Contra Costa County); Move from Kensington (Contra Costa County) to Berkeley (Alameda County), or from Redwood City (San Mateo County) to Albany (Alameda County). This is because Alameda is one of the Magnificent Seven which allows replacement homeowners coming from all California counties to retain their tax base. You CANNOT: Transfer Your Assessed Value When You: Sell your Albany home (Alameda County) and buy a replacement home on Coventry Road in Kensington (Contra Costa County) to be closer to the Kensington Circus Pub at Colusa Circle (one of our favorite places!) You would not be eligible to transfer your tax base because Contra Costa is not one of the Magnificent Seven, and does not accept tax transfers from other counties. Price Eligibility Requirements Your replacement home must be of “equal or lesser value” compared to the value of your original home. Caution! “equal or lesser value” can be confusing! If you purchased your replacement home before you sold your original home, then in order to qualify, the value of your replacement home must cost less than (or be equal to) 100% of the value of your original home; or If you purchased your replacement home within the first year following the sale of your original home, then in order to qualify, your replacement home must cost less than (or be equal to) 105% of the value of your original home; or If you purchased your replacement home within the second year following the sale of your original home, then in order to qualify, your replacement home must cost less than (or be equal to) 110% of the value of your original home. You Can: Sell for $975,000 and buy a replacement home for $600,000 Why? $600,000 is less than $975,000; Sell for $660,000 and buy for $690,000 within the first year. Why? $690,000 is 104.5% of the selling price (you’re within the one year 105% rule); Sell for $750,000 and buy for $815,000 within the second year. Why? $815,000 is 108.7% of the selling price (you’re within the two year 110% rule). Note: the above examples assume you meet all other age and county requirements. But You Cannot: Buy a replacement home for $815,000 and subsequently sell your original home for $750,000. You bought your replacement home before you sold your original home, and its cost was higher than the sale price of your original home! Dear Carol and Ira: We wanted to send our heartfelt appreciation for all your good work representing us in the sale of our home. At all times we have found you to be professional, caring, informative, and fun to work with! Additionally, my dad is 83 years old, so you have been particularly helpful to both of us in helping my dad through the transition of the sale of his home of 49 years. We each found you through different channels: my dad had heard about you through the neighbors in the area - you came highly recommended; I found you because you represented a house up the street. I went to the web site where you featured that property. I was amazed at how complete the information was on that particular home and, working in the research area of the transformation of the marketplace via the Internet, I recognized that you were ahead of the “pack” so to speak. Lastly, you return calls quickly and your experience levels are above average. On top of it all, you are nice people! Thank you again for all your good work. My best, Cindy Sparhawk Need Legal Or Tax Advice? This report is meant to give you an overview of a special property tax program. Please consult with your attorney and/or your tax advisor since they’re the ultimate experts! We’ve enclosed information from the Alameda County Assessor’s Office, and also an article written by the Los Angeles County Assessor’s Office, to help you in determining your tax transfer eligibility. There may be important income tax considerations when selling, so we’ve also included excerpts from IRS Instructions (Instructions for Schedule D) and the cover sheet for IRS Publication 523 (Selling Your Home). Need More Real Estate Information? Call Us! Let’s get together! We’ll review all your options so you’ll be able to decide what’s best for you. As real estate professionals with expertise in selling homes for the best possible prices, with the fewest problems, in the shortest time, we specialize in helping nice folks sell and buy wonderful homes in Berkeley and nearby communities. Relocating? Call Us For A Referral To An Excellent Realtor! Thinking of moving outside of the area we serve? We’ve personally met many other great real estate agents throughout the United States and Canada! Let us know where you’ll be moving, and we’ll refer you to someone who will take wonderful care of you! Which Of Your Friends Would Like This Report? Ask them to call us and we’ll send them a copy too! We welcome and value your referrals of friends and family. Ira & Carol Serkes Executive Toll Free 800.887.6668 or 510.526.6668 BerkeleyHomes.com & BerkeleyBlogCast.com Serkes@BerkeleyHomes.com Our custom moving van is free for our clients, community, and charitable organizations It’s also available to others in return for a contribution to Children’s Hospital Foundation supporting Oakland’s Children Hospital! Belong to an organization putting on a silent auction? Let us know and we’ll be happy to donate the use of our van! Ira & Carol Serkes, your neighborhood RE/MAX Realtors! Ira & Carol Serkes Executive Toll Free 800.887.6668 or 510.526.6668 BerkeleyHomes.com & BerkeleyBlogCast.com Serkes@BerkeleyHomes.com Credentials... And A Bit About Us Ira is a Seniors Real Estate Specialist (SRES), trained in special needs and programs for those 55 and better. He is one of the first 500 Realtors in the United States to obtain the ePro-500 (Electronic Real Estate Professional) designation, is an Accredited Buyer Representative (ABR), and Graduate of the Realtors’ Institute (GRI). Ira is co-author of Get the Best Deal When Selling Your Home – San Francisco Bay Area Edition and Nolo Press’ best selling book, How To Buy A House In California, now in its 10th edition after selling almost 100,000 copies. He and his wife Carol have been working with wonderful sellers and buyers in Berkeley and nearby communities since 1986. Both Ira and Carol are Certified Residential Specialists (CRS) by the National Association of Realtors, and are members of Allen Hainge’s CyberStars program, an elite group of 200 Realtors in the United States, Canada, Mexico, Australia and The Bahamas who use advanced technology to provide clients with extraordinary service. Ira and Carol have been honored by RE/MAX of California & Hawaii for their dedication to a referral based business. Ira and Carol have received the RE/MAX award for “Most Number Of Completed Referrals” for eight consecutive years. Ira was honored to be 2004 CyberStar of the Year. In a previous life, Ira was a Chemical Engineer. He graduated from Cooper Union for the Advancement of Science and Art in 1970, and received his Master’s Degree from the University of Massachusetts, Amherst in 1974. He holds two patents for his work at Chevron Research Company, and speaks fluent Bronx. Ira and Carol live with two kittens Poudini & Puddy Maximus in Berkeley’s Thousand Oaks neighborhood. Here’s a photo of their beloved Lucy The Cat (LTC), sadly now gone. There is no truth to the rumor that Ira and Carol painted their moving van to match Lucy’s colors! Thank you for reading this all the way to the end! It’s a wonderful life, isn’t it! Property Tax Qualification Flow Chart Are you at least 55 or permanently disabled? No Yes Moving within same County or into Magnificent 7? Yes No Magnificent 7 Counties: Alameda, San Mateo, Santa Clara, Los Angeles, Orange, San Diego & Ventura Will your sale and purchase be within 2 years of each other? No Yes Was your replacement home... A: Bought before you sold AND less expensive (or same price) as previous home, or; B: Bought within 1 year after selling AND less than (or equal to) 105% of selling price, or; C: Bought within 2 years after selling AND less than (or equal to) 110% of selling price? Doesn't look like you qualify - call Assessor's Office for details Yes Congratulations! Looks like you qualify! Flow chart by Ira Serkes, RE/MAX Executive 510-526-6668 Information deemed to be correct but not guaranteed Be sure to consult your legal & tax advisor before proceeding Property Tax Relief Report Copyright 2005 Ira & Carol Serkes OFFICE OF ASSESSOR COUNTY OF ALAMEDA 1221 Oak St., County Administration Building Oakland, California 94612-4288 (510) 272-3787 / FAX (510) 272-3803 RON THOMSEN AS S E SSO R TRANSFER OF PROPERTY TAX BASE FOR PERSONS 55 AND OLDER OR SEVERELY AND PERMANENTLY DISABLED (Revenue and Taxation Code 69.5) (Proposition 60, 90, or 110) PURPOSE This pamphlet will acquaint you with Section 69.5 which allows any person age 55 or older or severely and permanently disabled to transfer the base year value of their original property to a replacement dwelling of "equal or lesser value" that is purchased or newly constructed within two years of the sale of the original property. The full text of the law can be found in the State of California Property Taxes Law Guide, Volume 1. HISTORY Proposition 60 allowed for base value transfers to qualified replacement dwellings of "equal or lesser value" within the same county that were purchased or newly constructed on or after November 6, 1986. Proposition 90 extended the Prop 60 benefits to qualified homeowners transferring their base year values from other counties and was effective July 13, 1989 in Alameda county. Proposition 110 extended the benefits to qualified disabled homeowners of any age and was effective for replacement dwellings purchased or newly constructed on or after June 6, 1990. Senate Bill 1692 effective September 25, 1996 allowed qualified persons who had prior claims based on age 55 to have a second claim based on disability. REQUIREMENTS 1. At the time of the sale of the original property, the claimant or the claimant's spouse who resides with the claimant is at least 55 years of age, or severely and permanently disabled. The claimant's spouse need not be an owner of record of the original property. If co-owners, only the co-owner who is the claimant must be age 55 or disabled. 2. The claimant has not previously been granted, as a claimant, the property tax relief provided by this section. (See definition of "claimant") The sole exception is where the claimant was first granted relief based on age 55 and subsequently became severely and permanently disabled. The claimant may then qualify for a second claim based on the disability. 3. The replacement property must be purchased or newly constructed within two years either before or after of the sale of the original property. South County Toll Free (800) 660-7725 www.acgov.org/assessor 4. The sale of the original property must be a change in ownership that subjects the property to reappraisal at its current market value or results in a base year value transfer as a replacement dwelling for someone qualifying under Section 69.5 or the disaster relief provisions of Section 69. 5. At the time the claim is filed, the claimant is an owner of the replacement dwelling and occupies it as his or her principal place of residence and, as a result thereof, the property is eligible for the homeowner's exemption. 6. Either at the time of its sale or at the time it was substantially damaged by calamity or within two years of the purchase or new construction of the replacement dwelling, the claimant was an owner of the original property and occupied it as his or her principal place of residence and, as a result thereof, the property was eligible for the homeowner's exemption. 7. The replacement dwelling must be of "equal or lesser value" than the original residence. "Equal or lesser value" means that the market value of a replacement dwelling may not exceed: 100% of the market value of the original property if the replacement dwelling is purchased or newly constructed prior to the date of sale of the original property, 105% of the market value of the original property if the replacement dwelling is purchased or newly constructed within the first year following the date of sale of the original property, or 110% of the market value of the original property if the replacement dwelling is purchased or newly constructed within the second year following the date of sale of the original property. The market value of the original property may include indexing adjustments. Unless the replacement dwelling satisfies the "equal or lesser value" test, no benefit is available, not even a partial benefit. TO APPLY To apply for relief the completed claim form and required documents must be filed with the assessor within three years of the date the replacement dwelling is purchased or newly constructed. This claim is not open to public inspection. TO RESCIND To rescind a claim a written notice of rescission must be delivered to the assessor within certain time limits. A fee may be required. DEFINITIONS "Claimant" means any person claiming relief provided by this law and their spouse if the spouse is also a record owner of the replacement dwelling. "Person" means any individual, but does not include any firm, partnership, association, corporation, company, or other legal entity or organization of any kind except that the claimant(s) may hold their residence in trust for themselves. "Severely and permanently disabled person" is any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person. "Original property" and "Replacement dwelling" means place of abode that is owned and occupied by the claimant as his or her principal place of residence. Each unit of a multi-unit dwelling is considered a separate dwelling for claim purposes. "Sale and Purchase" mean "a change in ownership for consideration". "Market value of the original property" means its market value at the time of its sale or immediately prior to its damage by calamity if it was sold in its damaged state. QUESTIONS & ANSWERS Q: When making the "equal or lesser value" test, is a simple comparison of the sales price of the original residence and the purchase price or cost of new construction of the replacement dwelling all that is needed? A: Generally, when a property is sold on the open market its sales price is considered market value. However, because sale/purchase prices or costs of new construction are not always the same as market value, the assessor may have to determine the market value, which may differ from the sale/purchase price or cost of new construction. Note: Only the market value of the primary residence and its related improvements are used for the "equal or lesser value" test. For single unit properties this represents the total value of the property. For residential properties with commercial uses or extra living units the appraiser must deduct the market value of those portions for the "equal or lesser value" tests. (See example below) Q: The claimant sold his original two-unit property that consisted of his primary residence and a second unit and purchased a replacement dwelling. What portion of his sold property will qualify as the "original property" for the "equal of lesser value" test? A: For the "equal or lesser value" test, the "original property" consists of the claimant's primary residence (land and improvements). The market value of the second unit (land and improvements) would be deducted from the market value of the total property. Only the amount of the indexed base value allocated to the original residence would be transferred. Q: If otherwise qualified, will I meet the "equal or lesser value" test if I sold my original residence July 20,1999 for $350,000 and purchased my replacement dwelling May 3, 2000 for $365,000? Both properties were bought and sold for market value. A: Yes. The replacement dwelling was purchased within the first year following the sale of the original and its purchase price did not exceed 105% of the market value of the original residence ($350,000 X 1.05 = $367,500). (See requirement No. 7) Q: Can an otherwise qualified owner buy a vacant lot and then build a new replacement dwelling and qualify? A: Yes. As long as the completion of the new dwelling took place within two years, either before or after, the sale of the original property. The purchase of the lot can take place at any time before the completion of new construction. For the "equal or lesser value" test the total market value of the replacement property (land and improvements) is determined as of the date of the completion of the new construction. Q: Can I, a qualified claimant, sell my original home and buy a replacement dwelling with co-owners not of age 55 and transfer my base value? A: Yes, co-owners of any age are allowed. However, the total full market value of your original home will be compared with the total full market value of the replacement dwelling for the "equal or lesser value" test regardless of the fact that you are only a part owner of the replacement dwelling. Q: Can two owners sell their separately owned and occupied properties, combine their base year values, and purchase one replacement dwelling together? A: No. There is no provision for combining base year values. The base year value of only one original property can be transferred to the replacement dwelling. Q: Can two co-owners sell their original residence they shared and each still qualify for the claim when each acquires a separate replacement dwelling? A: No. Only one can receive the benefit. The qualified co-owners must decide between themselves who will get the benefit. Only in the case of a multiple unit original property where several co-owners qualify for separate homeowner's exemptions may portions of the factored base year value of that property be transferred to several qualified replacement dwellings. Q: Can I sell my original property and purchase a 50% interest in a replacement dwelling and still qualify? A: No. A partial or fractional interest purchase is not eligible. The entire interests in both the replacement dwelling and the original property must be purchased and sold. Q: Will the transfer of an original property or acquisition of a replacement dwelling by gift or devise qualify under Section 69.5? A: A property that is given away or acquired by gift or devise will not qualify because nothing of value was exchanged. Section 69.5 requires a "sale" of the original property and a "purchase" of a replacement dwelling. Q: May I sell my original property to my child and give my child the benefit of the parent-child exclusion and still transfer my base value when I purchase a replacement property? A: No. The parents need to choose to which exclusion they wish to apply their base year value. If the parents sell to their children and choose to transfer their base year value to them using the parent-child exclusion, then the base year value is no longer theirs to transfer to a replacement residence. Q: Can a mobile home qualify as either an original or a replacement dwelling for the base year value transfer? A: Yes, but only if the mobile home is subject to local property taxation (LPT). Mobile homes that pay vehicle license fees annually (VLF) would not qualify because they have no base year values. Q: Can a supplemental tax assessment be issued when the base year value is transferred from an original property to a replacement dwelling? A: Yes. The law requires that supplemental assessments, both positive and negative, be calculated for all transactions that result in base-year value changes. This is accomplished by comparing the base value transferred from the original property to the assessment on the replacement dwelling. Q: After receiving the notice that my application has been approved, do I still need to pay the existing tax bills? A: Yes. All outstanding tax bills on your replacement property must be paid. They will not be cancelled or corrected. Any overpayments you make will be refunded when the claim is processed. Q: Can new construction completed on a replacement dwelling after the transfer of the base value also qualify for relief under this section? A: Yes, provided that the new construction was completed within two years of the sale of the original property, the assessor is notified within 30 days of the completion, and the market value of the new construction plus the market value of the replacement dwelling when acquired does not exceed the market value of the original property as determined for the original claim. TELEPHONE NUMBERS ASSESSOR'S DEPARTMENT General Information Assessee Services ................................... 510 / 272-3787 Base Value Transfers ........................... 510 / 272-3787 (Age 55 / Disabled / Disaster Relief / Eminent Domain) Exclusions .............................................. 510 / 272-3800 (Parent-Child / Grandparent-Grandchild) Change in Ownership Information ......... 510 / 272-3800 Homeowner's Exemption ....................... 510 / 272-3770 Business Personal Property General Information ............................... 510 / 272-3836 Boats and Aircraft .................................. 510 / 272-3838 South County Toll Free ....................... 800 / 660-7725 Web Site: www.acgov.org/assessor RELATED COUNTY OFFICES Clerk, Assessment Appeals Board Assessment Appeals Information ........ 510 / 272-6352 Tax Collector Tax payment information including 24 Hour Automated System ................. 510 / 272-6800 Auditor Property Tax Rates ............................... 510 / 272-6564 Recorder Deed Recording Information ............... 510 / 272-6363 Rev 7/02 BOE-60-AH (FRONT) REV. 6 (8-03) RON THOMSEN, ASSESSOR CLAIM OF PERSON(S) AT LEAST 55 YEARS OF 1221 Oak Street, Room 145 AGE FOR TRANSFER OF BASE YEAR VALUE TO Oakland, CA 94612-4288 REPLACEMENT DWELLING (Intracounty and Intercounty, When Applicable) (510) 208-4807 / FAX (510) 272-3803 (Section 69.5 of the Revenue and Taxation Code) A. REPLACEMENT DWELLING ASSESSOR’S PARCEL NUMBER RECORDER’S DOCUMENT NUMBER DATE OF PURCHASE PURCHASE PRICE DATE OF COMPLETION OF NEW CONSTRUCTION $ COST OF NEW CONSTRUCTION $ PROPERTY ADDRESS (street, city, county) Was the new construction described performed on a replacement dwelling which has already been granted the benefit under section 69.5 within the past two years? Yes No If yes, what was the date of your original claim? B. ORIGINAL (FORMER) PROPERTY ASSESSOR’S PARCEL NUMBER DATE OF SALE SALE PRICE $ PROPERTY ADDRESS (street, city, county) Was this property your principal place of residence? Yes No NOTE: When applicable, if the property is located in a different county from that of the replacement property, you must attach a copy of the original property’s latest tax bill and any supplemental tax bill(s) issued before the date of sale. Also, was there any new construction to this property since the last tax bill(s) and before the date of sale? Yes No If yes, please explain: Was this property substantially damaged or destroyed by misfortune or calamity (not a Governor-declared disaster) and sold in its damaged state? Yes No If yes, what was the date of the misfortune or calamity? C. CLAIMANT INFORMATION (please print) NAME OF CLAIMANT SOCIAL SECURITY NUMBER DATE OF BIRTH AT LEAST AGE 55 NAME OF SPOUSE (provide if the spouse is a record owner of either the original property or the replacement dwelling) SOCIAL SECURITY NUMBER DATE OF BIRTH AT LEAST AGE 55 Yes No Yes No Have either you or your spouse previously been granted relief under section 69.5 because of disability? Yes No CERTIFICATION I/We certify (or declare) under penalty of perjury under the laws of the State of California that: (1) neither of the claimant(s) above have previously been granted relief under section 69.5; (2) as a claimant/occupant I/we occupy the replacement dwelling described as my/our principal place of residence; and (3) the foregoing, and all information hereon, is true, correct, and complete to the best of my/our knowledge and belief. CLAIMANT’S SIGNATURE DATE SPOUSE’S SIGNATURE DATE ✍ ✍ HOME PHONE NUMBER DAYTIME PHONE NUMBER ( ( ) ) MAILING ADDRESS If there are not enough spaces above for additional claimant(s) information, please use the above format on a separate sheet of paper and attach. If you have any questions about this form, please contact the Assessor’s Office. (Did you, as a claimant, remember to include a copy of your birth certificate with this form? If not, please do so.) All information provided on this form is subject to verification. IF YOUR APPLICATION IS INCOMPLETE, YOUR CLAIM MAY NOT BE PROCESSED. South County Toll Free (800) 660-7725 www.acgov.org/assessor BOE-60-AH (BACK) REV. 6 (8-03) GENERAL INFORMATION California law allows any person who is at least 55 years of age (at the time of sale of original/former property) who resides in a property eligible for the Homeowners’ Exemption (place of residence) or currently receiving the Disabled Veterans’ Exemption to transfer the base year value of the original property to a replacement dwelling of equal or lesser value within the same county. For purposes of this exclusion, original property and replacement dwelling mean a building, structure, or other shelter constituting a place of abode which is owned and occupied by a claimant as his or her principal place of residence, and land eligible for the homeowner’s exemption. If an original property is a multi-unit dwelling, each unit shall be considered a separate original property. In addition, to qualify for transfer of a base year value to a replacement dwelling all the following requirements must be met: (1) It must have been acquired or newly constructed on or after November 5, 1986 (except transfers between counties — see below); (2) The replacement dwelling must be purchased or newly constructed within two years of the sale of the original property; (3) The original property must be subject to reappraisal at its current fair market value in accordance with section 110.1 or 5803 of the Revenue and Taxation Code or must receive a transferred base year value as determined in accordance with sections 69, 69.3 or 69.5 of the Revenue and Taxation Code, because the property qualifies as a replacement residence; and (4) A claim for relief must be filed within 3 years of the date a replacement dwelling is purchased or new construction of that replacement dwelling is completed. If you are filing a claim for additional treatment under section 69.5 as the result of new construction performed on a replacement dwelling which has already been granted the benefit, you must complete the reverse side of this form. You may be eligible if the new construction is completed within two years of the date of sale of the original property; you have notified the Assessor in writing of the completion of new construction within 30 days after completion; and the fair market value of the new construction (as confirmed by the Assessor) on the date of completion, plus the full cash value of the replacement dwelling at the time of its purchase/date of completion of new construction (as confirmed by the Assessor) does not exceed the equal or lesser value test. In general, equal or lesser value means that the fair market value of a replacement property on the date of purchase or completion of construction does not exceed 100 percent of market value of original property as of its date of sale if a replacement dwelling is purchased before an original property is sold; 105 percent of market value of original property as of its date of sale if a replacement dwelling is purchased within one year after the sale of the original property; 110 percent of market value of the original property as of its date of sale if a replacement dwelling is purchased within the second year after the sale of the original property. If the original property was substantially damaged or destroyed by misfortune or calamity (not a Governordeclared disaster) and sold in its damaged state, the fair market value of the property immediately preceding the damage or destruction is used for purposes of the equal or lesser value test. A property is “substantially damaged or destroyed” if it sustains physical damage amounting to more than 50 percent of its full cash value immediately prior to the misfortune or calamity. The disclosure of social security numbers by all claimants of a replacement dwelling is mandatory as required by Revenue and Taxation Code section 69.5. [See Title 42 United State Code, section 405(c)(2)(C)(i) which authorizes the use of social security numbers for identification purposes in the administration of any tax.] The numbers are used by the Assessor to verify the eligibility of persons claiming this exclusion and by the state to prevent multiple claims in different counties. This claim is not subject to public inspection. If you feel you qualify for this exclusion, you must provide evidence that you are at least 55 years old and/ or declare under penalty of perjury (see reverse) that you are least 55, and complete the reverse side of this form. Generally, claimants will be granted property tax relief under section 69.5 of the Revenue and Taxation Code only once. However, the Legislature created an exception to this one-time-only clause. If a person becomes disabled after receiving the property tax relief for age, the person may transfer the base year value a second time because of the disability. A separate form for disability must be filed. Contact the Assessor. PLEASE NOTE: Transfers between counties are allowed only if the county in which the replacement dwelling is located has passed an authorizing ordinance. The acquisition of the replacement dwelling must occur on or after the date specified in the county ordinance. (Please complete applicable information on reverse side.) Home Site Map General Information How the Property Tax System Works Property Tax Overview Areas of Responsibility Public Service Videos Forms Reports & Publications Property Tax Guide Personal Property News & Press Contact Us FAQs Important Dates Información en Español Data For Sale Employment Tax Related Links About the Assessor County Links Contact Us Español Printer-Friendly Version Person(s) At Least 55 Years of Age Transfer of Base-Year Value to a Replacement Dwelling What Are Propositions 60 & 90? They are constitutional initiatives passed by California voters. They provide property tax relief by preventing reassessment when a senior citizen sells his/her existing residence and purchases or constructs a replacement residence worth the same or less than the original. Why Were They Enacted? They encourage a person, age 55 or older to "move down" to a smaller residence. When a senior citizen acquires a replacement property worth less than the original property, he/she will continue to pay approximately the same amount of annual property taxes as before. How Do These Propositions Work? When the senior citizen purchases or constructs a new residence, it is not reassessed, if he/she qualifies. The Assessor transfers the factored base value of the original residence to the replacement residence. Proposition 60 originally required that the replacement and the original be located in the same county. Later, Proposition 90 enabled this to be modified by local ordinance. Los Angeles County enacted an ordinance to provide that when the replacement is located in Los Angeles County, the original property may be located in any other California county. Who Qualifies? The seller of the original residence, or spouse who resides with the seller, must be at least 55 years of age at the time of the sale. When Are These Propositions Effective? You are visitor: 5,339,526 Thu, Feb 3, 2005 The replacement residence must have been purchased or constructed on or after November 5, 1986 if the original was located in Los Angeles County. The replacement residence must have been purchased or constructed on or after November 9, 1988 if the original was located in any other California county. Claims must be filed within three years following the purchase of the replacement residence. Where Are Claim Forms Available? They are distributed at Assessor's public counters, in Room 225 of the Kenneth Hahn Hall of Administration, and in district offices. If you need additional information, call (213) 893-1239. Propositions 60 and 90 Legal Reference: Section 69.5 of the Revenue & Taxation Code. Propositions 60 and 90 Eligibility Requirements: 1. The replacement property must be the owner's principal residence and eligible for the Homeowners' Exemption. The original property, at the time of its sale, must have been eligible for the Homeowners' Exemption, or entitled to the Disabled Veterans' Exemption. 2. The seller of the original residence, or a spouse residing with the seller, must be at least 55 years of age, as of the date that the original property is transferred. 3. The replacement property must be of equal or lesser "current market value" than the original. 4. If the replacement is purchased in Los Angeles County, the original can be located in Los Angeles County or any other California county. Several other counties have passed similar Proposition 90 local option ordinances. If your original is in Los Angeles County, and you want to relocate in another county, contact that county for Proposition 90 eligibility. 5. The replacement property must be purchased or newly constructed within two years (before or after) of the sale of the original property. 6. The owner must file an application within three years following the purchase date or new construction completion date of the replacement property. 7. This is a one-time only filing. Proposition 60/90 relief cannot be granted if the claimant, or spouse, was granted relief in the past. 8. Proposition 60/90 relief includes, but is not limited to: single family residences, condominiums, units in planned unit developments, cooperative housing corporation units or lots, community apartment units, mobile homes subject to local real property tax, and owners' living premises which are a portion of a larger structure. 9. In most instances, if more than one owner of an original property is eligible for Proposition 60/90, they must choose among themselves which one will use the benefits. For Public Service, call (213) 974-3211 Si necesita asistencia en Español, por favor llame gratis al (888)807-2111 y oprima "2" al escuchar el mensaje. Commonly Asked Propositions 60/90 Questions & Answers: Q. If I sell my current residence, can my replacement property be in any county of California and still be eligible for Proposition 60/90 benefits? A. No. In order to be eligible for Proposition 60/90 benefits your replacement property must be in Los Angeles County (Proposition 60), or a county that has passed similar Proposition 90 local option ordinances. A county's participation in Proposition 90 is not mandatory and is subject to change. Therefore, you should always contact that county for Proposition 90 eligibility before you purchase your replacement property. The following is a list of the counties currently participating in Proposition 90 as of January 10, 2001: 1. Alameda 2. Kern 3. Los Angeles 4. Modoc 5. Orange 6. San Diego 7. Ventura 8. San Mateo 9. Santa Clara Q. I think that the sale of my residence may qualify for this benefit. How may I apply? A. You must file a claim with the Assessor who will then determine if the transaction qualifies. Claim forms are available at the Assessor's public counter downtown and at the District Offices. Q. Can a taxpayer apply for and receive the benefit of Proposition 60 or 90 numerous times during the course of his/her lifetime? A. No. Only claimants who have not previously been granted this property benefit are eligible. This is a one-time benefit. Q. Is it true that only one claimant need be at least age 55 as of the date of the sale of an original property in order to qualify? A. Yes. The principal claimant/ occupant or his/her spouse/occupant must be age 55. Additional record owners need not identify themselves as a claimant; to do so is to use the "once in a lifetime" benefit as a principal claimant. Q. If I get Proposition 60/90 benefits will I still have to file for a Homeowners' Exemption on the replacement property? A. Yes. You must file for a Homeowners' Exemption on the replacement property. It is not granted automatically. Q. My wife and I are currently being divorced. May we split the value on our original dwelling and each transfer one half of the value to our separate replacement dwellings? A. No. The co-owners must determine between themselves, which one should receive the benefit. Q. What is the deadline for filing? A. Within three years of purchasing or completing new construction of the replacement property. Q. Isn't the Assessor precluded, under Propositions 60 and 90, from issuing supplemental assessments when the factored base year value is transferred from the original property to the replacement property? A. No. When the replacement property is purchased or newly constructed, the Assessor must issue positive or negative supplemental assessments. The Assessor processes the factored base value of the original property for the replacement property. If this value is higher than the prior value of the replacement property, a positive supplemental assessment is issued and a supplemental tax bill is mailed. If this value is lower than the prior value of the replacement property, a negative supplemental assessment is issued, and a refund is mailed. Q. In order to qualify, is it true that a replacement property must be acquired after the implementation date, and within two years (before or after) of the date of sale of the original property? A. Yes. If the original property was located in Los Angeles County (Proposition 60), the replacement must have been purchased or constructed after the November 5, 1986 implementation date. If the original property was located in any other California county (Proposition 90), the replacement must have been purchased or constructed on or after the November 9, 1988 implementation date. Q. Can a mobile home qualify as an original property when a replacement property is acquired? A. Yes, but only if the mobile home is enrolled as real property. If it is not, then the mobile home is not eligible since there is no real property base-year value to be transferred. In keeping with legislative intent, if a taxpayer were to convert his/her mobile home from vehicle license fee status to real property taxation status, in anticipation of applying for Proposition 60/90, a claim should be allowed assuming the claimant is otherwise qualified. Q. If I purchase a replacement dwelling and within two years make an addition to the new property, can my new construction qualify also? A. Yes, as long as the total amount of your purchase and the new construction do not exceed the market value of the original property at the time of its sale. Q. What is meant by "equal or lesser value" of a replacement property? A. It depends upon when you purchase the replacement property. In general, "equal or lesser value" means: 100 percent or less of the market value of the original property if a replacement property is purchased before an original property is sold. 105 percent or less of the market value of the original property if a replacement property is purchased within the first year after an original property is sold. 110 percent or less of the market value of the original property if a replacement property is purchased within the second year after an original property is sold. Q. If an original property is sold for $100,000, and a replacement property is purchased for $106,000 less than a year later, does the replacement property qualify for Proposition 60/90 benefits? A. Assuming that $100,000 was the market value of the original at the time of sale, and that $106,000 was the market value of the replacement at the time of the purchase, the answer is no. In this case, the replacement property is totally disqualified. The replacement property's market value exceeds 105 percent of the original property's market value. In this example, if the market value of the replacement property were $105,000, the answer would be yes. Q. If the market value of my replacement dwelling slightly exceeds the "equal or lesser value" test compared to the full market value of my original property, can I still receive partial benefit? A. No. Unless the replacement dwelling completely satisfies the "equal or lesser value" test, no benefit is available. It is "all or nothing." Q. When making the "equal or lesser value" test comparison, is a simple comparison of the sales price of the original property and the purchase price/cost of new construction of the replacement dwelling all that is needed? A. No. The comparison must be made using the full market value of the original property as compared to the full market value of the replacement dwelling as of its date of purchase/completion of new construction. This is important because the sales/purchase price is not always the same as market value. The Assessor must determine the market value of each property, which may differ from sales price. Q. I owned an original property with several other owners. We recently sold it. Each of us is now buying a new individual replacement dwelling. Can each of us claim Proposition 60/90 benefits? A. No. Only one of you original owners can claim the benefit for your new replacement dwelling. You must decide among yourselves which one will receive the benefit. That person has to have been eligible for the Homeowners' Exemption. Q. May I give my original property to my son/daughter and still receive the Proposition 60/90 benefit when I purchase a replacement property? A. No. The law provides that an original property must be sold for consideration and subject to reappraisal at full market value. Q. Will the transfer of an original property or a replacement property by gift or devise qualify for property tax relief under Proposition 60/90? A. No. Proposition 60/90 requires a "sale" of the original property and a "purchase" of a replacement property. "Sale" is defined as "any change in ownership of original property for consideration" and "purchase" is defined as a "change in ownership for consideration". Q. Can a claimant transfer the factored base year value from an original single family residence to a replacement duplex or multi-unit residence (living in one unit and renting the others)? A. Yes. The owner could carry the factored base year value of the original property to that portion of the replacement parcel that is his/her principal place of abode, and the land that constitutes a reasonable size to embody a site for the residence. However, that portion comprising the abode must be of equal or lesser value than the original property. The rest of the parcel will be appraised at its market value. Q. Has a claimant lost his/her Proposition 60/90 eligibility when he/she acquires a replacement dwelling first, occupies it and receives a Homeowners' Exemption, then almost two years later sells the original property which no longer has a Homeowners' Exemption? A. No. Obviously, in this situation, the taxpayer cannot qualify at the same time for a Homeowners' Exemption on both properties. Q. Can two people who separately owned original properties and sold them combine their Proposition 60/90 benefits when they buy one replacement property together? A. No. Only one of the new owners can claim the Proposition 60/90 benefits, whether they are married or not. Conditions of Use | Privacy Policy | Questions or Comments | Printer-Friendly Version Copyright © 2004 Office of the Assessor, County of Los Angeles - All Rights Reserved PAGER/SGML Userid: ________ DTD I1040AZ04 Leading adjust: 0% Fileid: I1040SD.SGM (14-Nov-2006) Page 1 of 10 of 2006 Instructions for Schedule D ❏ Draft (Init. & date) ❏ Ok to Print 13:55 - 14-NOV-2006 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service 2006 Instructions for Schedule D Use Schedule D (Form 1040) to report the following. • The sale or exchange of a capital asset (defined on this page) not reported on another Capital Gains form or schedule. • Gains from involuntary conversions (other than from casualty or theft) of capital assets and Losses not held for business or profit. • Capital gain distributions not reported directly on Form 1040, line 13, or Form 1040NR, line 14. • Nonbusiness bad debts. Additional information. See Pub. 544 and Pub. 550 for more details. For a comprehensive filled-in example of Schedule D, see Pub. 550. General Instructions Section references are to the Internal Revenue Code unless otherwise noted. Other Forms You May Have To File Use Form 4797 to report the following. 1. The sale or exchange of: a. Property used in a trade or business; b. Depreciable and amortizable property; c. Oil, gas, geothermal, or other mineral property; and d. Section 126 property. 2. The involuntary conversion (other than from casualty or theft) of property used in a trade or business and capital assets held for business or profit. 3. The disposition of noncapital assets other than inventory or property held primarily for sale to customers in the ordinary course of your trade or business. 4. Ordinary loss on the sale, exchange, or worthlessness of small business investment company (section 1242) stock. 5. Ordinary loss on the sale, exchange, or worthlessness of small business (section 1244) stock. 6. Ordinary gain or loss on securities held in connection with your trading business, if you previously made a mark-to-market election. See Traders in Securities on page D-3. Use Form 4684 to report involuntary conversions of property due to casualty or theft. Use Form 6781 to report gains and losses from section 1256 contracts and straddles. Use Form 8824 to report like-kind exchanges. A like-kind exchange occurs when you exchange business or investment property for property of a like kind. Capital Asset Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets. A capital asset is any property held by you except the following. • Stock in trade or other property included in inventory or held mainly for sale to customers. • Accounts or notes receivable for services performed in the ordinary course of your trade or business or as an employee, or from the sale of stock in trade or other property held mainly for sale to customers. • Depreciable property used in your trade or business, even if it is fully depreciated. • Real estate used in your trade or business. • Copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property: (a) created by your personal efforts; (b) prepared or produced for you (in the case of letters, memoranda, or similar property); or (c) that you received from someone who created them or for whom they were created, as mentioned in (a) or (b), in a way (such as by gift) that entitled you to the basis of the previous owner. • U.S. Government publications, including the Congressional Record, that you received from the government, other than by purchase at the normal sales price, or that you got from someone who had received it in a similar way, if your basis is determined by reference to the previous owner’s basis. • Certain commodities derivative financial instruments held by a dealer. See section 1221(a)(6). D-1 Cat. No. 24331I • Certain hedging transactions entered into in the normal course of your trade or business. See section 1221(a)(7). • Supplies regularly used in your trade or business. Basis and Recordkeeping Basis is the amount of your investment in property for tax purposes. You need to know your basis to figure any gain or loss on the sale or other disposition of the property. You must keep accurate records that show the basis and adjusted basis of your property. Your records should show the purchase price, including commissions; increases to basis, such as the cost of improvements; and decreases to basis, such as depreciation, nondividend distributions on stock, and stock splits. For more information on basis, see page D-7 and these publications. • Pub. 551, Basis of Assets. • Pub. 550, Investment Income and Expenses (Including Capital Gains and Losses) • Pub. 564, Mutual Fund Distributions. If you lost or did not keep records to determine your basis in securities, contact your broker for help. The IRS partners with companies that offer Schedule D TIP software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. To find out more, go to www.irs.gov/efile. Short Term or Long Term Separate your capital gains and losses according to how long you held or owned the property. The holding period for short-term capital gains and losses is 1 year or less. The holding period for long-term capital gains and losses is more than 1 year. To figure the holding period, begin counting on the day after you received the property and include the day you disposed of it. Page 2 of 10 of 2006 Instructions for Schedule D 13:55 - 14-NOV-2006 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. If you disposed of property that you acquired by inheritance, report the disposition as a long-term gain or loss, regardless of how long you held the property. Test 2. You have not sold or exchanged A nonbusiness bad debt must be treated as a short-term capital loss. See Pub. 550 for what qualifies as a nonbusiness bad debt and how to enter it on Schedule D. Even if you do not meet one or both of the above two tests, you still can claim an exclusion if you sold or exchanged the home because of a change in place of employment, health, or certain unforeseen circumstances. In this case, the maximum amount of gain you can exclude is reduced. Capital Gain Distributions These distributions are paid by a mutual fund (or other regulated investment company) or real estate investment trust from its net realized long-term capital gains. Distributions of net realized short-term capital gains are not treated as capital gains. Instead, they are included on Form 1099-DIV as ordinary dividends. Enter on line 13 the total capital gain distributions paid to you during the year, regardless of how long you held your investment. This amount is shown in box 2a of Form 1099-DIV. If there is an amount in box 2b, include that amount on line 11 of the Unrecaptured Section 1250 Gain Worksheet on page D-9 if you complete line 19 of Schedule D. If there is an amount in box 2c, see Exclusion of Gain on Qualified Small Business (QSB) Stock on page D-4. If there is an amount in box 2d, include that amount on line 4 of the 28% Rate Gain Worksheet on page D-8 if you complete line 18 of Schedule D. If you received capital gain distributions as a nominee (that is, they were paid to you but actually belong to someone else), report on line 13 only the amount that belongs to you. Attach a statement showing the full amount you received and the amount you received as a nominee. See the Instructions for Schedule B for filing requirements for Forms 1099-DIV and 1096. Sale of Your Home If you sold or exchanged your main home, do not report it on your tax return unless your gain is more than your exclusion amount. Your exclusion amount is zero if: • You acquired your home in a like-kind exchange in which all or part of the gain was not recognized, and • You sold or exchanged the home during the 5-year period beginning on the date you acquired it. Generally, if you meet the two following tests, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1). Test 1. You owned and used the home as your main home for 2 years or more during the 5-year period ending on the date you sold or exchanged your home. another main home during the 2-year period ending on the date of the sale or exchange of your home. You can choose to have the 5-year test period for ownership and use in Test 1 above suspended during any period you or your spouse serve on qualified official extended duty as a member of the uniformed services or Foreign Service of the United States. This means you may be able to meet Test 1 even if, because of your service, you did not actually use the home as your main home for at least the required 2 years during the 5-year period ending on the date of sale. See Pub. 523 for details, including how to report any taxable gain if: • You (or your spouse if married) used any part of the home for business or rental purposes after May 6, 1997, or • Your gain is more than your exclusion amount. Partnership Interests A sale or other disposition of an interest in a partnership may result in ordinary income, collectibles gain (28% rate gain), or unrecaptured section 1250 gain. For details on 28% rate gain, see the instructions for line 18 beginning on page D-7. For details on unrecaptured section 1250 gain, see the instructions for line 19 beginning on page D-8. Capital Assets Held for Personal Use Generally, gain from the sale or exchange of a capital asset held for personal use is a capital gain. Report it on Schedule D, Part I or Part II. However, if you converted depreciable property to personal use, all or part of the gain on the sale or exchange of that property may have to be recaptured as ordinary income. Use Part III of Form 4797 to figure the amount of ordinary income recapture. The recapture amount is included on line 31 (and line 13) of Form 4797. Do not enter any gain for this property on line 32 of Form 4797. If you are not completing Part III for any other properties, enter “N/A” on line 32. If the total gain is more than the recapture amount, enter “From Form 4797” in column (a) of line 1 or line 8 of Schedule D, skip columns (b) through (e), and in column (f) enter the excess of the total gain over the recapture amount. Loss from the sale or exchange of a capital asset held for personal use is not deductible. But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, D-2 you must report the transaction on Schedule D even though the loss is not deductible. For example, you have a loss on the sale of a vacation home that is not your main home and you received a Form 1099-S for the transaction. Report the transaction on line 1 or 8, depending on how long you owned the home. Complete columns (a) through (e). Because the loss is not deductible, enter -0- in column (f). Capital Losses You may deduct capital losses up to the amount of your capital gains plus $3,000 ($1,500 if married filing separately). You may be able to use capital losses that exceed this limit in future years. Be sure to report all of your capital gains and losses (except nondeductible losses) even if you cannot use all of your losses in 2006. See Pub. 550 to figure the amount of unused capital losses you can carry forward to 2007. Nondeductible Losses Do not deduct a loss from the direct or indirect sale or exchange of property between any of the following. • Members of a family. • A corporation and an individual owning more than 50% of the corporation’s stock (unless the loss is from a distribution in complete liquidation of a corporation). • A grantor and a fiduciary of a trust. • A fiduciary and a beneficiary of the same trust. • A fiduciary and a beneficiary of another trust created by the same grantor. • An executor of an estate and a beneficiary of that estate, unless the sale or exchange was to satisfy a pecuniary bequest (that is, a bequest of a sum of money). • An individual and a tax-exempt organization controlled by the individual or the individual’s family. See Pub. 544 for more details on sales and exchanges between related parties. If you disposed of (a) an asset used in an activity to which the at-risk rules apply or (b) any part of your interest in an activity to which the at-risk rules apply, and you have amounts in the activity for which you are not at risk, see the Instructions for Form 6198. If the loss is allowable under the at-risk rules, it then may be subject to the passive activity rules. See Form 8582 and its instructions for details on reporting capital gains and losses from a passive activity. Items for Special Treatment • Transactions by a securities dealer. See section 1236. • Bonds and other debt instruments. See Pub. 550. • Certain real estate subdivided for sale that may be considered a capital asset. See section 1237. PAGER/SGML Userid: ________ Fileid: P523.SGM Leading adjust: 0% (10-Nov-2005) ❏ Draft (Init. & date) ❏ Ok to Print Filename: D:\USERS\fmzhb\documents\Epicfiles\05P523.SGM Page 1 of 32 of Publication 523 14:10 - 10-NOV-2005 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury Internal Revenue Service Publication 523 Cat. No. 15044W Selling Your Home For use in preparing 2005 Returns Contents What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Main Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figuring Gain or Loss . . . . . . . . . . . . . . . . . . . . . . . Selling Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amount Realized . . . . . . . . . . . . . . . . . . . . . . . . Adjusted Basis . . . . . . . . . . . . . . . . . . . . . . . . . . Amount of Gain or Loss . . . . . . . . . . . . . . . . . . . Other Dispositions . . . . . . . . . . . . . . . . . . . . . . . 3 4 4 4 4 4 Determining Basis . . . . . . . . . . . . . . . . . . . . . . . . . Cost As Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . Basis Other Than Cost . . . . . . . . . . . . . . . . . . . . Adjusted Basis . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 7 8 Excluding the Gain . . . . . . . . . . . . . . . . . . . . . . . . . 9 Maximum Exclusion . . . . . . . . . . . . . . . . . . . . . . 9 Ownership and Use Tests . . . . . . . . . . . . . . . . . 9 Reduced Maximum Exclusion . . . . . . . . . . . . . . . 14 More Than One Home Sold During 2-Year Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Business Use or Rental of Home . . . . . . . . . . . . . . 16 Property Used Partly for Business or Rental . . . . 17 Reporting the Sale . . . . . . . . . . . . . . . . . . . . . . . . . 19 Comprehensive Examples . . . . . . . . . . . . . . . . . 19 Special Situations . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Deducting Taxes in the Year of Sale . . . . . . . . . . . 26 Recapturing (Paying Back) a Federal Mortgage Subsidy . . . . . . . . . . . . . . . . . . . . . . 27 How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . . 28 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 What’s New Katrina Emergency Tax Relief Act of 2005 (Act). This Act provides tax relief for persons affected by Hurricane Katrina. Under this Act, the rules for recapture of a federal mortgage subsidy have changed for homes damaged or destroyed by Hurricane Katrina. For more information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, later. Reminders Get forms and other information faster and easier by: Internet • www.irs.gov Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service (IRS) using Form 8822, Change of Address. Mail it to the Internal Revenue Service Center for your old address. (Addresses for the Service Centers are on the back of the form.)
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