Publication 523 - Selling Your Home - 2003 Page 13
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31meet the 2-year use test even if, because of your service,
Amended U.S. Individual Income Tax Return. Identify your
you did not actually live in your home for at least the
claim for refund by writing “Military Family Tax Relief Act”
required 2 years during the 5-year period ending on the
in red in the top margin of your Form 1040X. Generally, you
date of sale.
must file a claim for credit or refund within 3 years from the
date you filed your original return or 2 years from the date
Example. David bought and moved into a home in
you paid the tax, whichever is later. However, the deadline
1995. He lived in it as his main home for 2
1
/
years. For the
to file a claim based on this rule for 1997, 1998, 1999, or
2
next 6 years, he did not live in it because he was on
2000 has been extended to November 10, 2004.
qualified official extended duty with the Army. He then sold
Exception for individuals with a disability. There is an
the home at a gain in 2003. To meet the use test, David
exception to the use test if, during the 5-year period before
chooses to suspend the 5-year test period for the 6 years
the sale of your home:
he was on qualifying official extended duty. This means he
can disregard those 6 years. Therefore, David’s 5-year test
1) You become physically or mentally unable to care for
period consists of the 5 years before he went on qualifying
yourself, and
official extended duty. He meets the ownership and use
2) You owned and lived in your home as your main
tests because he owned and lived in the home for 2
1
/
2
home for a total of at least 1 year.
years during this test period.
Under this exception, you are considered to live in your
Period of suspension. The period of suspension can-
home during any time that you own the home and live in a
not last more than 10 years. You cannot suspend the
facility (including a nursing home) that is licensed by a
5-year period for more than one property at a time. You can
state or political subdivision to care for persons in your
revoke your choice to suspend the 5-year period at any
condition.
time.
If you meet this exception to the use test, you still have
Uniformed services. The uniformed services are:
to meet the 2-out-of-5-year ownership test to claim the
•
exclusion.
The Armed Forces (the Army, Navy, Air Force,
Marine Corps, and Coast Guard),
Previous home destroyed or condemned. For the own-
•
ership and use tests, you add the time you owned and lived
The commissioned corps of the National Oceanic
in a previous home that was destroyed or condemned to
and Atmospheric Administration, and
the time you owned and lived in the home on which you
•
The commissioned corps of the Public Health Serv-
wish to exclude gain. This rule applies if any part of the
ice.
basis of the home you sold depended on the basis of the
destroyed or condemned home. Otherwise, you must have
Foreign Service member. You are a member of the
owned and lived in the same home for 2 of the 5 years
Foreign Service if you are any of the following.
before the sale to qualify for the exclusion.
•
A Chief of mission.
•
Married Persons
An Ambassador at large.
•
A member of the Senior Foreign Service.
If you and your spouse file a joint return for the year of sale,
•
you can exclude gain if either spouse meets the ownership
A Foreign Service officer.
and use tests. (But see Maximum Exclusion, earlier.)
•
Part of the Foreign Service personnel.
Example 1 — one spouse sells a home. Emily sells
Qualified official extended duty. You are on qualified
her home in June 2003. She marries Jamie later in the
official extended duty if you serve on extended duty either:
year. She meets the ownership and use tests, but Jamie
•
does not. Emily can exclude up to $250,000 of gain on a
At a duty station at least 50 miles from your main
separate or joint return for 2003.
home, or
•
While you live in Government quarters under Gov-
Example 2 — each spouse sells a home. The facts
ernment orders.
are the same as in Example 1 except that Jamie also sells
a home in 2003. He meets the ownership and use tests on
You are on extended duty when you are called or or-
his home. Emily and Jamie can each exclude up to
dered to active duty for a period of more than 90 days or for
$250,000 of gain.
an indefinite period.
Death of spouse before sale. If your spouse died and
Claiming a refund for a prior-year home sale. This
you did not remarry before the date of sale, you are
rule for members of the uniformed services or the Foreign
considered to have owned and lived in the property as your
Service became law in 2003 but applies to any sale of a
main home during any period of time when your spouse
main home after May 6, 1997. Therefore, you may be
owned and lived in it as a main home.
entitled to a refund if this rule applies to you and you paid
tax on a gain from the sale of a home after that date. If you
Home transferred from spouse. If your home was trans-
are entitled to a refund, complete and file Form 1040X,
ferred to you by your spouse (or former spouse if the
Page 13
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