Principl residence

Two college professors own a principal residence and a second one. One of the profs is named president of his college for an interim period expected to last 2 years but which actually lasts approximately 4 years, during which a search is conducted to find a permanent president. During the 4 years or so, the profs are required by the college to reside full time at college expense in a house on campus, creatively called the president's residence. They left the other 2 residences unoccupied, save for the few weeks each year when they go to the second one for a vacation, and the occasional visit to the first one to check on it (never overnight). For a month or two, they allowed their son to live in the first residence. There was never any doubt that they would return to the first residence, and I think they continued to get some mail there. I'm pretty sure their drivers' licenses never changed addresses.

What is the FIT treatment of the 2 residences that they own during their residency in the president's residence? You know, the usual stuff, like deducting property tax and interest on both, and excluding gain, should they sell the first one. I think that section 119 is clearly applicable, but chime in on that too, if you wish. The college paid their rather minor moving costs, if that's important. If needed, the approximate move-out date was around 7-1-15 and the approximate move-back-in date was 6-30-19.

Is this Harry and Wilma, from your post three years ago?

viewtopic.php?p=66836#p66836

Should the discussion pick up where that one left off?

I would suggest that the distinction between residence and domicile provides a clue.

Is this Harry and Wilma, from your post three years ago?
. Yes it is, starting around post #19. I knew I had posted on this but did not recall that back then, 3+ years ago, I had the patience and energy to get into that much detail. Today, not so much.

So now the facts are pretty much known, with relatively little surmise on my part.

Should the discussion pick up where that one left off?. OK by me.

Someone please help me with Dennis2's comment. I once knew the difference, but that was long ago.

There's some great definitions and explanation of the difference between residency and domicile.

I'll give you just a couple which should help.......
Domicile = A place /location that a person treats as their PERMANENT HOME and has a substantial connection to A person can can remain domiciled in a state /jurisdiction even after he has left it ,if he has maintained sufficient links with the jurisdiction or has not displayed an intention to leave permanently. I would suggest that based on the facts you presented your domicile is the state where you own the two residences. Finally the last definition on Domicile which provides direction on your question...... A person's fixed ,permanent and principal home for LEGAL purposes.

Residence = The jurisdiction /state your currently living in but have no intention of staying permanently. Based on your facts that would be the state where you are a professor .

All 3 are in the same state, and the one they moved from is about a mile from the one they moved to. It's a fine state!

What is the amount of rent ,if any, paid monthly for housing provided by university ?

Totally free, no rent at all. Beautiful old fully furnished house, complete with maintenance, utilities, whatever.

It has been forcefully brought to my attention that the first word of the subject of this topic is Spelled incorrectly. Actually I was trying to tread the fine line between principle and principal.

I would suggest that the distinction between residence and domicile provides a clue.

I don't agree. I've never read or heard this meaning of "residence" (along with "domicile") used for anything other than determining tax jurisdiction (U.S. vs foreign country, or one U.S. state vs another). I've never seen those terms used when it comes to the "principal residence" provisions that come into play for Schedule A mortgage interest, or Sec 121 exclusion.

The intent of the individual as to what will happen at the end of the 4 year stint is paramount to the discussion. As such, domicile is determined by intent and is relevant to these posts.

"Actually I was trying to tread the fine line between principle and principal." You done trod [done trodden?] good.

The intent of the individual as to what will happen at the end of the 4 year stint is paramount to the discussion. As such, domicile is determined by intent and is relevant to these posts.

No, it is not. See code and regs cited below. Intent is not mentioned anywhere, nor is domicile.

§163(h)(4)(A)(i):

The term "qualified residence" means-
(I) the principal residence (within the meaning of section 121) of the taxpayer,

§1.121-1(b):

(2) Principal residence. In the case of a taxpayer using more than one property as a residence, whether property is used by the taxpayer as the taxpayer's principal residence depends upon all the facts and circumstances. If a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer's principal residence. In addition to the taxpayer's use of the property, relevant factors in determining a taxpayer's principal residence, include, but are not limited to—

(i) The taxpayer's place of employment;
(ii) The principal place of abode of the taxpayer's family members;
(iii) The address listed on the taxpayer's federal and state tax returns, driver's license, automobile registration, and voter registration card;
(iv) The taxpayer's mailing address for bills and correspondence;
(v) The location of the taxpayer's banks; and
(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.

Makbo, I was agreeing with you right up until I read the list at the bottom of your last post. Now I'm not so sure. Don't those six factors look an awful lot like the factors that states use to determine domicile?

Makbo, I was agreeing with you right up until I read the list at the bottom of your last post. Now I'm not so sure. Don't those six factors look an awful lot like the factors that states use to determine domicile?

No, they look more like the factors many states use to determine residency. And note that "intent" is not found anywhere in the list. But my point was, domicile and residency have to do with tax jurisdiction -- it applies to a locality, not a specific property (dwelling unit). You can move from one side of town to the other without changing your tax jurisdiction; you can leave your state or country (place) for a while but intend to return to the place (not necessarily the exact same property), thereby maintaining your domicile in that place. And while a homeless person may not have any principal residence (dwelling), they most certainly have a domicile, which clearly illustrates that the two concepts are independent.

Maybe the confusion comes from the common root word "resident" in both "residency" and "principal residence", but the meaning is different in the different context. Yes, domicile does involve intent, but which dwelling is your principal residence depends strictly on facts and circumstances.

In the previous thread, WeissEA and Nilodop seemed to agree that the home owned by H&W was their principal residence, not because of anything having to do with intent (Nilodop wrote " But who knows, they may retire and move."), but because of the facts and circumstances of their use of the property.

If the good professors intend to maintain their principal residence for §121 purpose there are many i's they can dot and t's they can cross. Vehicle and voter registration, church/synagogue/club memberships, mailing address...

I would think that all the items that states use to assert residency tend to strengthen their case

If the good professors intend to maintain their principal residence for §121 purpose there are many i's they can dot and t's they can cross. Vehicle and voter registration, church/synagogue/club memberships, mailing address...

I would think that all the items that states use to assert residency tend to strengthen their case

I disagree. States that use voter registration/mailing address types of tests are states with a domicile-type test for residency. Another type of test is "if you're physically present in our state for at least X days, you're a resident". Some states, Missouri being the most vivid in my memory, consider you a resident if you meet either a domiciliary or a presence test.

The §121 test is not a domiciliary test; it is a presence one. It doesn't say a principal residence is the property the taxpayer would have preferred to consider their principal residence, it's the one they actually used a majority of the time with certain exclusions and suspensions. So unless they can get the university home classified as a nursing home, my vote is that the four years don't count towards §121.

(Of course, the reality is that the IRS isn't going to audit this, but that is not relevant to the academic question)

119 for universities is a little bit different I believe.

I take issue the rent free. There is something about 5% FMV of rent that you might have to include into his income. Haven’t touch this in a while.

See § 1.121-1 for a list of i's to dot and t's to cross.

That list appears above in post #13, but I submit it's not all that helpful here. These two houses are about 1 mile apart, and the arrangement was always meant to be temporary while a search for a new president was conducted. The early estimate was it would take 2 years, but it stretched to 3 and finally took 4.

To illustrate, let's run down the list:
Taxpayer's use of the college property (nights spent there) - 2015, 182, 2016, 2017, 2018, 365 each, 2019, 183. These are pretty close to accurate.
Place of employment - no change
Principal place of abode of family members - only H and W, kids grown and gone, days as above. (Is "abode" residence or domicile ?
Address listed on returns, license and registration, and voter reg'n, old address. Why bother to change?
Mailing address for bills, old address; for "correspondence" (do people use mail for correspondence?), old address, why change?
Banks - no change.
Religious and recreational orgs., no change.
Also, they left their furniture where it was because the president's house is furnished.

It's not a mechanical or arithmetic test; seems clear to me that, in their unusual circumstances, their residence was, for 4 years, at the college.