|   Dear
Tax Talk,
Is there a chance that the government can change
the current law on capital gains from home sales? I'm thinking it
might be best to sell now and cash out on the $200,000 tax-free
gain I've received on my home of three years (before laws change
and I might have to pay tax on it or "roll it"). Is my
fear a possible valid concern? Do you foresee them changing it so
the government can gain some of the wealth everyone has been receiving
from home sales? -- Kathe
 Dear
Kathe,
So you're concerned that what the real estate
gods giveth, the government will taketh away.
Do
you mean is there a chance that the tax laws will change every year and in all
administrations? The answer is you can bank on it. Will it affect the home-sale
exclusion? The answer is, you never know. In
my humble opinion, I doubt that the law will change with respect to home sales
for quite a while, since homeownership is the cornerstone of American life as
provided through tax incentives.
If the law changes overnight, there would be a big push to sell and cash out everyone's
sheltered equity. With a huge supply on the market, home prices would probably
be driven down and a lot of wealth eliminated among middle-class America. I don't
think any Congress or president would want to be known for this. I think the government
would resort to other sources of revenues before it would drastically touch the
home sale exclusion. If you made
an outright sale of your home, you could certainly shelter the $200,000 you have
gained so far, but you may be giving up a lifestyle choice for something that
is not highly probable. If you tried to self-deal with the home in order to increase
its cost there would be no guarantee that it would stand up in the future. For
example, if you sold the home to a relative or a closely held company in order
to increase its cost and so that you could continue to use the property, the Internal
Revenue Service could disallow the transaction as lacking purpose. In
the final analysis, you have to do whatever makes you sleep easier at night, but
I don't think you should rush out and do something on speculation. | 
