Publication 515 (11/2002)
Withholding of Tax on Nonresident Aliens and Foreign Entities
For Withholding in 2003

Publication 521 (2003)
Moving Expenses

Publication 523 (2002)
Selling Your Home

The 1997 Taxpayer Relief Act contained a big break for homeowners. The law applies to sales after May 6, 1997.

If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return, according to the IRS. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. You also must not have excluded gain on another home sold during the two years before the current sale

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not.  

If you do not meet the ownership and use tests, you may be allowed to exclude a portion of the gain realized on the sale of your home if you sold your home due to a change in health or place of employment.

If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, use Schedule D, Form 1040, to report it.

Publication 527 (2002)
Residential Rental Property
(Including Rental of Vacation Homes)

Publication 530 (2003)
Tax Information for First-Time Homeowners

Publication 544 (2003)
Sales and Other Dispositions of Assets

Like-Kind Exchanges

Generally, if you exchange business or investment property solely for business or investment property of a like kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.

Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.

Like-Kind Property

Properties are of like kind if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.

Real properties generally are of like kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.

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