Home gain sale-prorated exclusion

A couple of years ago (or longer), I expressed a position
that the "unforeseen circumstances" clause of the rules
permitting partial exclusion of the gain on a home which had
NOT met the full 2 year ownership/residence rule under IRC
121 could be used as a very broad exception since
"unforeseen circumstances" was yet undefined. My initial
position on this topic was prompted first by a CPE seminar I
attend each year sponsored by the Texas Extension Education
Foundation, Inc (Tax Practitioner
Workshop..www.taxworkshop.com).

Today I finished another such two-day seminar. The same
instructor (Richard Griffith, CPA) covered the same topic.
He spent 29 years with the IRS, the last 12 in appeals, and
is now in public practice as well as still affiliated with
the Foundation.

His stance on this topic is the same. I told him that when I
had stated on this newsgroup that the "unforeseen
circumstances"  permitted a loose interpretation that
everyone on the group had disagreed (in a very constructive
manner I might add), he responded by saying I should bring
the topic up again and ask everyone to review all the
actions over the last 2 or three years on this matter. In
his opinion, there are now several more "specific safe
harbors" and there will be more as practitioners use new
"unforeseen circumstances". In his view, the exception "an
event determined by IRS to be an unforeseen circumstance"
does not restrict us from taking a more liberal view on
whether a sale not meeting the 2 year period might qualify
for a pro-rated exclusion. It simply makes it a potential
difference of opinion with the IRS auditor, and will
ultimately be determined on the specific facts and
circumstances.

I agree there should be a compelling argument that the sale
was unexpected due to a specific set of circumstances
preventing the taxpayer from postponing the sale to the full
2/5 year rules. However, I don't agree that we must wait
until this specific set of circumstances appears on a
settled case, reg, etc....It will be these cases that will
broaden the "safe harbor" items.

Well, I didn't write this to be argumentative. I am just
encouraging everyone to revisit their earlier position.
Developments since our last discussion may make some want to
reassess their positions.

Happy holidays to you all!!

Mike Lewis, CPA

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