AICPA Recommends Changing Residence Sale Exclusion Year-of-Death Rule

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December 14, 2005

AICPA Recommends Changing Residence Sale Exclusion Year-of-Death Rule




The Honorable Charles E. Grassley Chairman of Committee on Finance United States Senate 219 Dirksen Senate Office Building Washington, D.C. 20510 The Honorable William M. Thomas Chairman of Ways and Means Committee United States House of Representatives 1102 Longworth House Office Building Washington, D.C. 20515 Dear Chairmen Grassley and Thomas: The American Institute of Certified Public Accountants is pleased to present for your consideration the attached proposal concerning the section 121 residence sale exclusion year-of-death rule. The AICPA's Individual Taxation Technical Resource Panel has identified an inequity in the present law and recommends the enclosed legislative proposal. This proposal has been approved by our Tax Executive Committee. Specifically, under current law, a surviving spouse is allowed a $500,000 exclusion on the sale of a home within the tax year of the death of a spouse. However, if a taxpayer dies at the end of the year, the surviving spouse is at a disadvantage and has a much shorter time to sell the home and use the $500,000 exclusion. We recommend that the current section 121 exclusion for a spouse dying within a tax year be amended to provide a 12-month period from the date of death of a spouse during which the surviving spouse can use the $500,000 exclusion. Our recommendation would fix this inequity in tax treatment that results when a taxpayer dies late in the year with a simple and fair solution for all taxpayers. We recognize that this proposal would not affect some taxpayers because of the basis step-up at death under current law. However, we feel this proposal would remove an inequity from the tax law without increasing complexity and with little revenue impact. We would be happy to meet with you or your staff to discuss these matters. If you have any questions, please contact me at tpurcell@creighton.edu; Joel Maller, Chair of the AICPA Individual Tax Technical Resource Panel, at jsmcpa@erols.com; or Lisa Winton, AICPA Technical Manager, at lwinton@aicpa.org. Sincerely, Thomas J. Purcell, III Chair, Tax Executive Committee cc: Mark Prater, Chief Counsel, Senate Committee on Finance Patrick Heck, Chief Tax Counsel, Senate Committee on Finance Robert Winters, Chief Tax Counsel, House Committee on Ways and Means Janice Mays, Minority Chief Counsel, House Committee on Ways and Means Thomas Barthold, Acting Chief of Staff, Joint Committee on Taxation Eric Solomon, Acting Assistant Secretary (Tax Policy), Treasury Michael Desmond, Tax Legislative Counsel, Treasury Download Proposal




Copyright © 2005 by the American Institute of Certified Public Accountants, Inc., New York, New York.