Thank you for allowing me to answer your interesting question. The
term ?main home? is described in the introductory material to IRS
Publication 523. Simply put the publication says, ?Generally, your
main home is the one in which you live most of the time.?
IRS PUBLICATION 523
The publication goes on to more definitively describe ?main home?
under the section aptly entitled, ?MAIN HOME?:
?This section explains the term ?main home.? Usually, the home you
live in most of the time is your main home and can be a:
Cooperative apartment, or
To exclude gain under the rules in this publication, you generally
must have owned and lived in the property as your main home for at
least 2 years during the 5-year period ending on the date of sale.
Land. If you sell the land on which your main home is located, but
not the house itself, you cannot exclude any gain you have from the
sale of the land.
On March 4, 2005, you sell the land on which your main home is
located. You buy another piece of land and move your house to it. This
sale is not considered a sale of your main home, and you cannot
exclude any gain on the sale of the land.
Vacant land. The sale of vacant land is not a sale of your main home unless:
The vacant land is adjacent to land containing your home,
You owned and used the vacant land as part of your main home,
The sale of your home satisfies the requirements for exclusion and
occurs within 2 years before or 2 years after the date of the sale of
the vacant land, and
The other requirements for excluding gain from the sale of the vacant
land have been satisfied.
If these requirements are met, the sale of the home and the sale of
the vacant land are treated as one sale and only one maximum exclusion
can be applied to any gain. See Excluding the Gain, later.
More than one home. If you have more than one home, you can exclude
gain only from the sale of your main home. You must include in income
gain from the sale of any other home. If you have two homes and live
in both of them, your main home is ordinarily the one you live in most
of the time.
You own and live in a house in the city. You also own a beach house,
which you use during the summer months. The house in the city is your
You own a house, but you live in another house that you rent. The
rented house is your main home.
Factors used to determine main home. In addition to the amount of time
you live in each home, other factors are relevant in determining which
home is your main home. Those factors include the following.
Your place of employment.
The location of your family members' main home.
Your mailing address for bills and correspondence.
The address listed on your:
Federal and state tax returns,
Car registration, and
Voter registration card.
The location of the banks you use.
The location of recreational clubs and religious organizations you are a member of.
Property used partly as your main home. If you use only part of the
property as your main home, the rules discussed in this publication
apply only to the gain or loss on the sale of that part of the
property. For details, see Business Use or Rental of Home, later.?
It appears then that by the IRS?s definition your main home will be
your California residence, regardless of your Texas state residency,
since that?s where you will PHYSICALLY and PRIMARILY reside. If you
require an absolute confirmation of this fact, you may contact the IRS
support Center and provide them with details that almost certainly
would not have if they were to ask for them, or I would have called
them on your behalf.
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Request for Answer Clarification by
14 Oct 2006 14:18 PDT
Thank you for pointing out the "main home" section. I had missed
that. It seems pretty definitive there what a main home is, but after
I posted my question, I did additional research and found what I
believe is a discrepancy through the definition of "vacation home" in
the IRS FAQ: http://www.irs.gov/faqs/faq-kw203.html
"You are considered to use a dwelling AS A HOME if you use it for
personal purposes during the tax year for more than the greater of 14
days or 10% of the total days it is rented to others at a fair rental
price. IT IS POSSIBLE THAT YOU WILL USE MORE THAN ONE DWELLING UNIT AS
A HOME DURING THE YEAR. For example, if you live in your main home
for 11 months and in your vacation home for 30 days, your home is a
dwelling unit and your vacation home is also a dwelling unit, unless
you rent your vacation home to others at a fair rental value for more
than 300 days during the year."
With this statement, I believe I can classify my "vacation home" in
Texas as a "main home" for the time I'm going to be there, which is
more than 14 days per year. As a result, I believe using the number
of days I'm using my vacation home as my main home (approx. 60-70 days
per year) on Worksheet 3 would be an appropriate way to treat this
scenario. What is interesting is that MY "vacation home" is my wife's
"main home." There is no law against that.
With this treatment, the down side is that I can only do this once
every two years as described in Pub 523:
"More than one home sold during 2-year period: You cannot exclude
gain on the sale of your home if, during the 2-year period ending on
the date of the sale, you sold ANOTHER home at a gain and excluded all
or part of that gain. If you cannot exclude the gain, you must
include it in your income."
Although at first read of this paragraph it would seem the IRS is
addressing the traditional arrangement where people typically live in
one home throughout an entire year, I think it can also be interpreted
that vacation homes where you reside for part of the year (as long as
it's over 14 days) that you end up selling can be considered as
In Example 1 that you cited, I don?t think that applies to me because
I will not own the home where I will be living most of the year; I'll
Example 2 doesn't apply to me because this example applies to someone
who owns a home, but doesn?t live in it at all during the year. I
will continue to own the home in Texas.
In sum, the IRS in this "More than one home sold..." clause doesn't
seem to exclude vacation homes that are your main home for part of the
As I remember from a tax class I once took, much of tax law is open to
interpretation. And if the IRS disagreed with me, I believe if I took
it to court that my interpretation would withstand scrutiny. Would
you agree? (please respond).
Even without this vacation-home-being-a-main-home-for-part-of-the-year
interpretation, several of the aforementioned factors would apply to
me: my family members? (spouse) main home is my Texas home, bills for
my Texas home go to the Texas location, I?ll continue to have a car
registered in my name in Texas, I will continue to use my bank in
Texas to make deposits, ATM transactions, I will continue to be a
member of a recreational club in Texas, etc. There's that
interpretation principle again. ;-) But I think the one I mentioned
about the vacation home is the one I would use if a dispute with the
Clarification of Answer by
14 Oct 2006 14:36 PDT
Indeed I do agree that the law is open to interpretation and the IRS
makes no attempt to conceal the fact that they are willing to make
exceptions in some cases depending on the many and varied details of
each individual's tax status. Whether or not the matter would pass the
legal llitmus test is not for me to say since our advice here is not
intended to replace profesional tax advise.
As for the "main houses" in your life (your's and your wife's) I am
certain you have, at the very least, an relatively unique case but
probably not one that has no previous precedent. Frankly, I'd simply
call the support center and explain my situation and ask them directly
what you are expected to do. They will be more than happy to assist
you. Contrary to what most people tend to believe, the IRS is not out
to get blood from every turnip out there. They would much prefer that
someone call and ask the necessary questions so future (and costly to
both parties) misunderstandings can be avoided.
You must keep in mind that (as I understand the publication) what your
"main home" actually is, is not necessarily what is considered your
"main home" for exclusion, deduction or gains purposes. The IRS
clearly defines your "main home" as home in which you physically live
MOST of the time. However, for the special purposes I mentioned, your
"main home" must meet two tests: "the ownership test" and "the use
test". To meet these minimums you must have owned the home for at
least 2 years (the ownership test), **AND** you must have lived in the
home as your "main home" for at least 2 years (the use test). Since
you have done neither with the home in California, but it IS where you
primarily live, register your car, registered your licenses, etc, the
TECHNICAL deferrment is to the home in California - but NOT for the
special purposes I mentioned. You see? With that said, it is my
understanding that the home in California is fundamentally YOUR main
home as defined by Pub 523. How the IRS might answer your question
regaridng your WIFE may be the loophole that you are seeking.
I suggest you call them. They can probably answer your question in a
matter of minutes. As I said, they'd certainly ask me questions I
cannot answer or I would have done it for you. The number is toll free
and you have nothing to lose.