Love some advice on taxation!

[Nathan Hood]

Hello all,

I am a chef that bought a live and flip to get my foot in the door with real estate.  I bought a foreclosure and fixed it up my self and added a bed room and bathroom on to the house.  The restaurant I was running shut down due to the pandemic so obviously making the mortgage is something I am now concerned about since the f&B industry is going to take a while to bounce back to where it was.  I was planning on living in the property for at least 2 years because I have two kids and its in a great school district and wanted to avoid heavy tax.  We are now feeling selling and getting out of it now would be our best option since my family can move into an extra space from other family members at a much lower cost and the pandemic is far from over. I am on unemployment since this whole thing has happened as well. SO the question is is there any tax exemptions for a unforeseeable event such as a pandemic?  Would love some input and if there are any professionals out there reading this I would love to know what my options are!

thank all of you for your time and stay safe!

Nathan 

[Eamonn McElroy]

Selling the house because of not being able to afford alone is not a unforeseen circumstances...

Not sure I agree.  Two of the safe harbors for unforeseen circumstances under the -3 reg are The cessation of employment as a result of which the qualified individual is eligible for unemployment compensation (as defined in section 85(b)) AND A change in employment or self-employment status that results in the taxpayer's inability to pay housing costs and reasonable basic living expenses for the taxpayer's household

OP will want to make sure he meets both the ownership and use test for the property.  If he never moved in it will not be likely he meets the use test and all of this is moot.

And we should note this is only a partial exclusion that may not provide a ton of relief.

Talk to your tax professional to determine if the position is defensible and how to document everything.  Good luck.