1031 Exchange Services

Private Letter Ruling No. 1989-42008 (PLR 198942008)

Internal Revenue Service (I.R.S.)

Private Letter Ruling

Issue: October 20, 1989

July 17, 1989


Section 121 — One Time Exclusion of Gain from Sale of Principal Residence by Individual Who Has Attained Age 55


Husband =

Wife =

Mother =
Property =

This is in response to your submission of September 16, 1988. Additional information was received January 9 and February 14, 1989.

Husband and Wife, by the entireties, own Property jointly with Mother. There are two houses on the Property. Husband and Wife have occupied one house from 1983 to the present. It is represented that they have done so as their principal residence. Mother, from 1940 to May, 1987, occupied the other house. It is represented that this was her principal residence during this period. In May of 1987, Mother voluntarily entered a home for the elderly, one licensed by the State of * * * as a facility for those physically or mentally unable to care for themselves. Husband, Wife and Mother are all over age 55. Husband, Wife and Mother now wish to sell the Property, including the houses, and exclude any gain under section 121 of the Internal Revenue Code of 1986.

Section 121 allows an individual to exclude any gain, up to $125,000, on the sale of property from gross income if certain conditions are met: First, the taxpayer must have attained the age of 55. Second, the taxpayer, during the five-year period ending on the date of the sale or exchange, must have used the property as his principal residence for three of those five years. If the conditions are met, the taxpayer may elect to exclude up to $125,000 of gain on the sale of the property from gross income. In section 6011(a) of the Technical and Miscellaneous Revenue Act of 1988, P.L. 100-647, Congress amended section 121 to allow taxpayers who have become physically or mentally incapable of self-care and who have entered a state-licensed facility for the care of mentally or physically disabled individuals to continue to qualify for the benefits of section 121 if they owned and used the property as their principal residence for at least one year of the five-year period referred to above.

Section 121 is available to joint owners of property otherwise qualifying for the benefits of section 121. In Revenue Ruling 67-234, 1967-2 C.B. 78, the Service ruled that an unmarried individual who held title to his principal residence as a joint tenant or tenant-in-common could exclude from his gross income under section 121 that portion of the gain which was attributable to his undivided interest in the residence at the time of the sale. In Revenue Ruling 67-235, 1967-2 C.B. 79, the Service held that a brother and sister who jointly owned their principal residence could utilize section 121 to exclude from gross income the portion of the gain on the sale of the residence attributable to their undivided interests. Thus, section 121 is available to joint owners of property who are not married. Further, the gain each joint owner may exclude from income is limited to that portion attributable to their undivided interest in the residence.

Based on the facts as represented, we rule that Husband and Wife, as one joint owner, and Mother, as the other joint owner, may each exclude their share of the gain on the sale of Property, up to $125,000, attributable to their undivided interest in the Property, but only to the extent used by each joint owner as their principle residence. We make no determination as to which portion of the Property is to be considered the principle residence of the taxpayers.

This ruling is premised on the assumption that each of Husband, Wife and Mother occupied Property as their principal residence.

This ruling is directed only to the taxpayers who requested it. Section 6110(j)(3) of the Code provides that it may not be used or cited as precedent. A copy of this ruling should be attached to the return of each taxpayer.


Sincerely yours,


Assistant Chief Counsel
(Income Tax and Accounting)
By: William A. Galanko
Chief, Branch 6


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