Form 2119 and Sec 121 Exclusion

[cientax]

Q: When did Form 2119 become obsolete and when did section 121 exclusion become law?

I'm asking because I have a client that did not file 2001 return and sold his residence in 2001. IRS did SFR for that year and we are trying to minimize his liability. IRS is taxing him on the entire amount of the sales price. We don't have any information on his selling expenses but we do have the information on what he originally paid for the home. Should we just report this on Sch-D and let him pay the cost for not keeping accurate records and for not filing? No way we can get the information for selling expenses. He did not buy another main home.

[joanmcq]

I believe it was 1997 or 1998. It was right before I started practicing in 1999.

[JohnH]

Yes, it was May 1997.

I assume you've checked with the real estate agent and the closing attorney to ask if a copy of the HUD-1 is still available. Also might be able to get a copy of the HUD-1 from the buyer's lender or even from the buyer themselves. Some people keep old records for a long time. (For example, if the buyer were my client I'd have kept a copy of the HUD-1 in my files to support the deduction for points paid on purchase, if any. And in 1991 I was keeping copies of all HUD-1 forms because at the time it was still necessary to track basis on personal residences).

Lacking any of the above, some info might still be available in the public record. In NC, for example, it's possible to determine the amount paid for "Tax Stamps", which is a local govt fee based on the selling price of the house, simply by looking it up on line. Usually the tax stamps are only $300 or so, but the income tax on $300, plus penalties & interest on a late-filed return for 16 years woiuld add up to enough to more than pay for the research.

I'd rather try to help the client rather than help the IRS punish him. They will do a good enough job of that, and helping him avoid some P&I might build some long-term client loyalty.

[cientax]

Yes, it was May 1997.

I assume you've checked with the real estate agent and the closing attorney to ask if a copy of the HUD-1 is still available. Also might be able to get a copy of the HUD-1 from the buyer's lender or even from the buyer themselves. Some people keep old records for a long time. (For example, if the buyer were my client I'd have kept a copy of the HUD-1 in my files to support the deduction for points paid on purchase, if any. And in 1991 I was keeping copies of all HUD-1 forms because at the time it was still necessary to track basis on personal residences).

Lacking any of the above, some info might still be available in the public record. In NC, for example, it's possible to determine the amount paid for "Tax Stamps", which is a local govt fee based on the selling price of the house, simply by looking it up on line. Usually the tax stamps are only $300 or so, but the income tax on $300, plus penalties & interest on a late-filed return for 16 years woiuld add up to enough to more than pay for the research.

I'd rather try to help the client rather than help the IRS punish him. They will do a good enough job of that, and helping him avoid some P&I might build some long-term client loyalty.

If Section 121 was available in 2001, how would I get the exclusion, if any, to work on the Sch-D for 2001? Any help please!

[cientax]

If Section 121 was available in 2001, how would I get the exclusion, if any, to work on the Sch-D for 2001? Any help please!

Never mind about the 121 exclusion, client owned the home less that two years and does not qualify for reduced exclusion because he does not meet any of the required criteria.

[jainen]

>>No way we can get the information for selling expenses. He did not buy another main home.<<

The title company and the real estate agent should still have those records, as will the buyer and buyer's mortgage company. Otherwise, make a good faith estimate. Most likely there was not much besides the commission, which is typically 6%.

[JohnH]

Don't know where my brain was - I responded thinking you said 1991.

Time to go home - I'm banning me from the forum for the rest of today.