Q:

Dear Kerry,

I was reading your website and I hope you will be able to answer a question for me.

I moved across country from my primary residence in order to go to a highly ranked school.  I can't afford to maintain the property any longer and wish to sell it. 

I left my primary residence for school.  Does that qualify as a change in place of employment so that I may get the tax break?

Thanks.

A:

While the law and related IRS explanations don't specifically mention school related moves in relation to the reduced pro-rated tax free gain exclusion, such a justification should be eligible for at least a few reasons. 

In many other parts of the tax code, being a full time student is equated with being an employee.  This seems like a perfect place to do the same thing.

To qualify, you do need to be ready to prove if asked that the move to the school was unknown at the time you bought or moved into your residence.

Another way to justify it would be an unexpected change in your finances.  If you had originally believed that you would be able to afford keeping the home, and the new schooling situation changed that capability, you have met that test.

This is definitely a good example of one of the many gray areas in taxation.  Unlike most other tax pros, who want to interpret gray areas in favor of the IRS, I have always done the opposite.  If the law doesn't specifically say that unexpected education related moves don't qualify, I say you should use it.  

Those are just the thoughts that came to mind.  You should work with your personal tax advisor for more specifics.

Good luck.

Kerry Kerstetter

Follow-up Q:

 Kerry,

  Thank you for the prompt reply.  Proving going to school was unanticipated at the time I moved in is easy since I lived there for a couple of years and worked a couple different jobs before deciding to go to law school.  I even though I'd go back, but didn't manage to get a job offer in California (where the home is) but did get one in Maryland.

  If you could point me to some other parts of the code that discuss full time students, I would appreciate it.  I'll keep doing my own research but any support to convince my wife would be helpful.  She thinks like the tax pros you refer to (though she's an engineer, not a tax pro).

Thanks again.

Follow-up A:

I don't have time to dig up all of the references to students as equivalent to employees.  I have a ton of tax returns and extensions to finish by April 15.

The one that I do encounter quite often is Form 2441 for the credit child and dependent care expenses.  In order to claim this credit, both the taxpayer and spouse need to have earned income.  However, if either of them is a full time student, they are imputed a certain amount of income to qualify for the credit. 

I hope this helps. 

Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 4/17/2005 06:21:00 PM Send this post: