Furthermore, the exclusion amount was limited whenever the adjusted sales price
(sales price minus expenses) exceeded $20,000 (later increased to $35,000).
A size adjustment is found that most completely centralizes the adjusted sales price
of the comparable sales.
Of course, the "adjusted sales price
" must be reallocated among the various asset classes (such as accounts receivable, inventories, intangibles, fixed assets, etc.).
Neumann charts all the new-home developments in his market, with an adjusted sales price
along one axis, square footage along the other.
He claimed the sale came under Internal Revenue Code section 1034, which allows a taxpayer to roll over the gain from the sale of a home if(1) it is his or her principal residence, (2) the taxpayer purchases a new residence within two years--before or after-the date the old residence is sold and (3) the cost of the new residence is equal to or greater than the adjusted sales price
of the old residence.
In order to defer tax on the full amount of the gain, the purchase price of the new residence must equal or exceed the "adjusted sales price
" of the old residence.
Since the cost of each new home was more than the respective shares of the adjusted sales price
of the old home, both spouses must rollover his and her portion of the realized gain.
Any such gain would be deferred to the extent the adjusted sales price
of the former residence (after a reduction for any excluded gain) was reinvested in a replacement residence.
1034(a) allowed for gain nonrecognition on the sale of a principal residence, if (1) the purchase price of the new residence was at least as much as the adjusted sales price
of the old and (2) the new residence was occupied by the taxpayer beginning within two years before and ending within two years after the sale of the old residence.
The deferral of gain is available only if the cost of purchasing the new residence exceeds the adjusted sales price
of the old residence.
On the other hand, the seller was able to subtract these points from the adjusted sales price
to reduce any realized gain from the sale of a principal residence.
TABLE 4 Calculation of Adjusted Sales Price
Sale Subject NOI/ Comparable Adjusted Price/ No.