- February 21, 2007
- All Issuing Offices
- Federal Reporting Update: Modified 1099-S Reporting on Sales of Principal Residences
The "Taxpayers Relief Act of 1997" generally allows taxpayers, on the sale or exchange of a principal residence, to exclude up to $250,000 of gain individually or $500,000 of gain if a married couple filing jointly. The exclusion may be used once every two years. The land must have been used as a principal residence for two of the last five years.
In order to comply with recent changes in the law, the seller certification has been modified effective January 22, 2007. The American Jobs Creation Act of 2004 and the Gulf Opportunity Zone Act of 2005 provide that the exclusion for gain does not apply if the principal residence was acquired in a like-kind exchange for which gain was not recognized under Section 1031(a) or (b) of the Internal Revenue Code within the last five years.
"Real Estate Reporting Persons" do not need to file a 1099-S on sales or exchanges of principal residences, if:
- The sales price is at or below $250,000 if the seller is a single individual, or $500,000 if the seller is married.
- The Real Estate Reporting Person secures a certification from the sellers in form acceptable to the IRS.
- The Real Estate Reporting Person retains the certification for four years after the year of the sale or exchange of the residence.
The Real Estate Reporting Person usually is the settlement agent on the HUD-1.
The IRS has now approved a modified seller certification, which is available for use on and after January 22, 2007. The certification has three parts, which must be completed by each seller: Part I (name, address or legal description of the residence being sold, and taxpayer identification number); Part II (regarding use and ownership of the property); and Part III (seller's signature). The sellers must say "true" to each question in Part II (or ?not applicable? to assurance (6)), or you cannot rely on the certification.
If there are multiple sellers, you must obtain a certification from each seller or report on that seller.
If one of the sellers does not complete the certification (and say "yes" to each question in Part II), you must do 1099-S reporting on that person. In that case you must request an allocation of the sales price among the sellers. If no allocation is given, you must show the entire sales price on the 1099-S reporting on that person who does not complete the certification.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.
- Bulletins Replaced:
- NL000062 This Bulletin has been replaced by SLS00345.
- Related Bulletins:
- NL000009 1099-S Reporting\Real Estate Transactions\Regulations Effective January 1, 1991
- NL000016 Form 1099-S Reporting
- NL000057 Federal Reporting Update: 1099-S, FIRPTA, and Over $10,000 Cash
- Underwriting Manual:
- Exceptions Manual: