Instructions For Form N-103 - Sale Of Your Home

INSTRUCTIONS

Page 3

FORM N-103 (REV. 2012)

• You sold the home during the 5-year period be-

tween your new place of employment and the

d. Divorce or legal separation under a decree

home sold is at least 50 miles).

of divorce or separate maintenance, or

ginning with the date your home was acquired

e. Multiple births resulting from the same

in the like-kind exchange.

Health

pregnancy.

Gain from a like-kind exchange is not taxable

The sale of your main home is because of

4. An event the IRS determined to be an unfore-

at the time of the exchange. This means that gain

health if your primary reason for the sale is:

seen circumstance in published guidance of

will not be taxed until you sell or otherwise dispose

• To obtain, provide, or facilitate the diagnosis,

general applicability. For example, the IRS de-

of the property you receive. To defer gain from a

termined the September 11, 2001, terrorist at-

cure, mitigation, or treatment of disease, illness,

like-kind exchange, you must have exchanged

tacks to be an unforeseen circumstance.

or injury of a qualified individual, or

business or investment property for business or

• To obtain or provide medical or personal care

Reasonable basic living expenses. Reasonable

investment property of a like kind. For more in-

basic living expenses for your household include

for a qualified individual suffering from a dis-

formation about like-kind exchanges, see federal

the following expenses.

ease, illness, or injury.

Publication 544.

• Amounts spent for food.

The sale of your home is not because of health

Home relinquished in a like-kind exchange. The

• Amounts spent for clothing.

if the sale merely benefits a qualified individual’s

same tests that apply to determine if you qualify

general health or well-being.

• Housing and related expenses.

to exclude gain from the sale of your main home

For purposes of this reason, a qualified indi-

• Medical expenses.

(discussed earlier) also apply to determine if you

vidual includes, in addition to the individuals listed

qualify to exclude gain from the exchange of your

• Transportation expenses.

earlier under Qualified Individual, any of the fol-

main home for another property. Under certain cir-

• Tax payments.

lowing family members of these individuals:

cumstances, you may meet the requirements for

• Court-ordered payments.

• Parent, grandparent, stepmother, stepfather.

both the exclusion of gain from the exchange of a

• Expenses reasonably necessary to produce

main home and the nonrecognition of gain from a

• Child, grandchild, stepchild, adopted child, eli-

income.

like-kind exchange (discussed above under Sale

gible foster child.

of home acquired in a like-kind exchange). This

Any of these amounts that are spent to maintain

• Brother, sister, stepbrother, stepsister, half-

can occur if you used your property as your main

an affluent or luxurious standard of living are not

brother, half-sister.

home for a period before the exchange that meets

reasonable basic living expenses.

• Mother-in-law, father-in-law, brother-in-law, sis-

the use test, but at the time of the exchange, you

Nonqualified Use

ter-in-law, son-in-law, or daughter-in-law.

used your home for business or rental purposes.

• Uncle, aunt, nephew, niece, or cousin.

Gain from the sale or exchange of the main

This can also occur if you used your main home

home is not excludable from income if it is alloca-

partly for business or rental purposes and then ex-

Doctor’s recommendation safe harbor. Health

ble to periods of nonqualified use. Generally, non-

changed the home. In these situations, you would

is considered to be the reason you sold your home

qualified use means any period in 2009 or later

first exclude the gain from the sale of your main

if, for one or more of the reasons listed at the be-

where neither you nor your spouse (or your former

home to the extent allowable, and then apply the

ginning of this discussion, a doctor recommends a

spouse) used the property as a main home with

nonrecognition of gain provisions of Internal Rev-

change of residence.

certain exceptions (see below).

enue Code section 1031 for like-kind exchanges

Unforeseen Circumstances

to defer any remaining gain. For more information,

Exceptions. A period of nonqualified use does

The sale of your main home is because of an

see Revenue Procedure 2005-14, which is on

not include:

unforeseen circumstance if your primary reason

page 528 of Internal Revenue Bulletin 2005-7.

1. Any portion of the 5-year period ending on the

for the sale is the occurrence of an event that you

date of the sale or exchange that is after the

Home destroyed or condemned. If your home

could not reasonably have anticipated before buy-

last date you (or your spouse) use the property

was destroyed or condemned, any gain (for exam-

ing and occupying that home. You are not consid-

as a main home;

ple, because of insurance proceeds you received)

ered to have an unforeseen circumstance if the

2. Any period (not to exceed an aggregate period

qualifies for the exclusion.

primary reason you sold your home was that you

of 10 years) during which you (or your spouse)

Any part of the gain that cannot be excluded

is serving on qualified official extended duty:

preferred to get a different home or because your

(because it is more than the maximum exclusion)

finances improved.

a. As a member of the Uniformed Services;

can be postponed under the rules explained in:

b. As a member of the Foreign Service of the

Specific event safe harbors. Unforeseen circum-

• Federal Publication 547, in the case of a home

United States, or

stances are considered to be the reason for selling

that was destroyed, or

c. As an employee of the intelligence commu-

your home if any of the following events occurred

• Federal Publication 544, chapter 1, in the case

nity; and

while you owned and used the property as your

of a home that was condemned.

3. Any other period of temporary absence (not to

main home.

exceed an aggregate period of 2 years) due to

Sale of remainder interest. Subject to the other

1. An involuntary conversion of your home, such

change of employment, health conditions, or

rules in federal Publication 523, you can choose to

as when your home is destroyed or con-

such other unforeseen circumstances as may

demned.

exclude gain from the sale of a remainder interest

be specified by the IRS.

2. Natural or man-made disasters or acts of war or

in your home. If you make this choice, you cannot

Special Situations

terrorism resulting in a casualty to your home,

choose to exclude gain from your sale of any other

whether or not your loss is deductible.

interest in the home that you sell separately.

The situations that follow may affect your exclu-

3. In the case of qualified individuals (listed earlier

sion.

Exception for sales to related persons. You

under Qualified Individual):

cannot exclude gain from the sale of a remainder

Sale of home acquired in like-kind exchange.

a. Death,

interest in your home to a related person. Related

You cannot claim the exclusion if:

b. Unemployment (if the individual is eligible

persons include your

brothers and sisters, half-

• You acquired your home in a like-kind exchange

for unemployment compensation),

brothers and half-sisters, spouse, ancestors (par-

(also known as a section 1031 exchange);

c. A change in employment or self-employ-

ents, grandparents, etc.), and lineal descendants

your basis in your home is determined by refer-

ment status that results in the individual’s

(children, grandchildren, etc.). Related persons

ence to the basis of the home in the hands of

inability to pay reasonable basic living ex-

also include certain corporations, partnerships,

penses (listed under Reasonable basic liv-

the person who acquired the property in a like-

trusts, and exempt organizations.

ing expenses, below) for his or her house-

kind exchange (for example, you received the

hold,

home from that person as a gift), and

Instructions For Form N-103 - Sale Of Your Home - 2012 Page 3

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