The sale or exchange is no later than two years after your spouse's death.For more information, see IRS Publication 523.Īlso, if married, filing jointly, but your spouse died before the sale or exchange, you can still exclude up to $500,000 of gain if: In this case, the maximum amount of gain you can exclude is reduced, according to the IRS. It made the announcement in Action on Decision 2019-03.Even if you don't meet one or both of the above two requirements, you can still can claim an exclusion if you sold or exchanged the home because of a change in place of employment, health, or certain unforeseen circumstances. The IRS said in October 2019 that it does not agree with the decision and will continue to insist that companies report the purchase price in cases like this as ordinary income. The case is Greenteam Materials Recovery Facility PN v. A contract qualifies as a “franchise” if it is “an agreement which gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities, within a specified area.” A taxpayer is allowed to report any gain from the sale of a franchise as capital gain as long as it does not retain a continuing interest in the franchise after the sale. It said the contracts are “franchises” within the meaning of section 1253 of the US tax code. There is no difference in tax rates on corporate capital gains, but any capital losses a corporation is carrying forward can only be used to offset capital gains.īy the time the case got to court, it had come down to one issue: whether sale of the service contracts produced capital gains. Individuals are taxed on their capital gains at reduced rates. The IRS audited in 2009 and insisted that the sellers had to report everything as ordinary income. The partnerships reported the gains largely as capital gains. The parties allocated the purchase price among the three partnerships and among three categories of assets: covenants not to compete, the trucks and other tangible assets, and goodwill and going concern value. A sale was arranged later the same year to Waste Connections for $46 million.
The partnerships invested in garbage trucks, trash bins and other equipment.Īn outside consultant approached the partnerships in 2002 about selling the business. They could be renewed by agreement of the parties. The partnerships won the contracts by bidding for them after the municipalities issued requests for proposals. Three partnerships held contracts with Tehama County and the cities of Red Bluff and San Jose in California to collect garbage and recyclables and to dispose of the garbage. The key was the contract qualified as a “franchise” to provide services in a particular geographic area. Sale of a service contract produced capital gain rather than ordinary income, the US Tax Court said in June 2017.
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