Although these IRS Regulations are temporary. they are likely to become permanent and can now be used retroactively for taxed principal residence sales which are still open to amend for up to three years after the income tax return due date or extension date - currently tax years 1999. 2000.2001. and of course 2002 are "open." Home sellers who paid capital gain tax on their home sale profit in those tax years should file IRS Form 1 04 OX to amend their tax returns and claim a refund if eligible for a retroactive partial exemption.

Internal Revenue Code § 121(c) says a home seller who fails to meet the full two-year occupancy test can qualify for a partial exemption if the sale is due to (1) change in place of employment, (2) health reasons, or (3) unforeseen circumstances.

Change in place of employment is defined, as expected, to conform to the moving cost tax deduction. That means a home seller can qualify for the partial exemption if a household member's new workplace is at least 50 miles further away from the residence than was their old job site. To illustrate, suppose the distance from the principal residence to the former work location was five miles. That means the distance to the new job location must be at least 55 miles, in this example, to qualify for the partial home sale tax exemption after less than 24 months of ownership and/or occupancy.

The moving cost tax deduction also has additional work time tests, such as being employed at least 39 weeks during the year after the move in the vicinity of the new job site. For self-employed persons, the minimum qualifying work time test is 78 weeks during the following 104 weeks after the job location change.

Health reasons are now defined, in addition to a physician's recommendation to the homeowner or a family member for a move due to health reasons, to include additional purposes such as (1) to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual (defined as the taxpayer, spouse, residence co-owner, and certain other family members living in the residence), and (2) need to move to care for a family member. However "a sale or exchange that is merely beneficial to the general health or well-being of the individual is not a sale or exchange by reason of health."

Unforeseen circumstances now include several "safe harbor" principal residence sale reasons which the IRS will not challenge. The first five reasons must involve the taxpayer, spouse, co-owner, or a member of the taxpayer's household. In addition, the IRS Commissioner has the discretion to determine other circumstances which are unforeseen:

• Death;
• Divorce or legal separation;
• Becoming eligible for unemployment compensation;
• Change in employment which leaves the taxpayer unable to pay the mortgage or reasonable basic living expenses;
• Multiple births resulting from the same pregnancy;
• Damage to the residence resulting from a natural or man-made disaster, or an act of war or terrorism; and
• Condemnation, seizure or other involuntary conversion of the property.

*Nationally recognized syndicated columnist in real estate and attorney Robert Bruss offers reports on a wide array of real estate services and publishes in-depth real estate newsletters. Write to him at P.O. Box 2022, Detroit 48231