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New Jersey Statutes - Title 54A New Jersey Gross Income Tax Act - 54A:6-9.1 Gains from sale, exchange of principal residence, excludable from gross income; conditions

Legal Research Home > New Jersey Laws > New Jersey Gross Income Tax Act > New Jersey Statutes - Title 54A New Jersey Gross Income Tax Act - 54A:6-9.1 Gains from sale, exchange of principal residence, excludable from gross income; conditions

54A:6-9.1. Gains from sale, exchange of principal residence, excludable from gross income; conditions
     1. a. The gain realized from the sale or exchange of property by a taxpayer shall be excludable from the gross income of the taxpayer at the election of the taxpayer, which shall be in conformity with the election of the taxpayer made for federal income tax purposes pursuant to section 121 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.121, if, during the five-year period ending on the date of the sale or exchange, that property has been owned and used by the taxpayer as the taxpayer's principal residence for periods aggregating two years or more.

     b.     The amount of gain excludable from gross income under subsection a. of this section with respect to any sale or exchange shall not exceed:

     (1)     $250,000; or

     (2)     $500,000, in the case of a husband and wife filing jointly for the taxable year of the sale or exchange of the property, if:

     (i)     either spouse meets the ownership requirements of subsection a. with respect to the property;

     (ii)     both spouses meet use requirements of subsection a. of this section with respect to the property; and

     (iii)     neither spouse is ineligible for the exclusion provided in subsection a. of this section with respect to the property by reason of the limitations of subsection c. of this section.

     c.     The exclusion provided in subsection a. shall not apply to any sale or exchange by the taxpayer if, during the two-year period ending on the date of sale or exchange, there was another sale or exchange after May 6, 1997 by the taxpayer to which an election made pursuant to subsection a. applied, except that this limitation shall not prevent a husband and wife filing jointly from each excluding up to $250,000 of gain from the sale or exchange of each spouse's principal residence provided that each spouse would be allowed to exclude up to $250,000 of gain if each spouse had filed separately.

     d.     If a sale or exchange to which this section would apply but for the failure to meet the aggregate two-year period of ownership and use by the taxpayer as the taxpayer's principal residence during the five-year period ending on the date of the sale or exchange, and the sale or exchange is by reason of a change in place of employment, health, or unforeseen circumstances, to the extent provided for a similar exemption for federal income tax purposes pursuant to section 121 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.121, then notwithstanding the amount of excludable gain allowed under subsection b. of this section, the amount of gain excludable from gross income with respect to such sale or exchange shall not exceed the amount which bears the same ratio to the amount which would be so excluded under this section if such requirements had been met as the shorter of

     (1)     the aggregate periods, during the five-year period ending on the date of such sale or exchange, the property has been owned and used by the taxpayer as the taxpayer's principal residence, or

     (2)     the period after the date of the most recent prior sale or exchange by the taxpayer to which subsection a. of this section applied and before the date of such sale or exchange bears to two years.

     e. (1) An exclusion allowed pursuant to this section shall be available if a husband and wife file jointly for the taxable year of the sale or exchange and either spouse meets the ownership and use requirements of subsection a. of this section with respect to the property.

     (2)     For the purposes of this section, in the case of an unmarried individual whose spouse is deceased on the date of sale or exchange of property, the period the unmarried individual owned and used the property shall include the period the deceased spouse owned and used the property before the deceased spouse's death.

     (3)     For the purposes of this section, in the case of an individual holding property transferred to the individual in a transaction described in subsection (a) of section 1041 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1041, the period the individual owns the property shall include the period the transferor owned the property. An individual shall be treated as using the property as the individual's principal residence during any period of ownership while the individual's spouse or former spouse is granted use of the property under a divorce or separation instrument as defined in paragraph (2) of subsection (b) of section 71 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.71.

     f.     The provisions of this section shall apply with respect to qualified tenant-shareholders in cooperatives.

     g.     The exclusion of gain allowed pursuant to this section shall not apply to so much of the gain from the sale of any property as does not exceed the portion of the depreciation adjustments (as deemed in paragraph (3) of subsection (b) of section 1250 of the federal Internal Revenue Code of 1986) attributable to periods after May 6, 1997, in respect of that property.

     h.     For the purposes of this section, the destruction, theft, seizure, requisition, or condemnation of property shall be treated as the sale of the property.

     i.     In the case of a taxpayer who

     (1) becomes physically or mentally incapable of self-care, and

     (2) owns property and uses that property as the taxpayer's principal residence for periods aggregating at least one year during the five-year period described in subsection a. of this section;

that taxpayer shall be treated as using that property as the taxpayer's principal residence during any time during such five-year period in which the taxpayer owns the property and resides in any facility (including a nursing home) licensed by the State or political subdivision to care for an individual in the taxpayer's condition.

     j.     At the election of the taxpayer, the exclusion provided pursuant to this section shall apply to the sale or exchange of an interest in a principal residence by reason of that interest being a remainder interest in that residence, but this section shall not apply to any other interest in such residence which is sold or exchanged separately. However, this subsection shall not apply to any sale to, or exchange with, any person who bears a relationship to the taxpayer which is described in subsection (b) of section 267 or subsection (b) of section 707 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.267 or 26 U.S.C. s.707.

     k.     This section shall not apply to any sale or exchange by an individual if the treatment provided by paragraph (1) of subsection (a) of section 877 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.877, applies to that individual for federal income tax purposes.

     l.     In the case of property the acquisition of which by the taxpayer resulted under N.J.S.54A:6-9 in the exclusion of any part of the gain realized on the sale or exchange of another residence, there shall be included in determining the period for which the taxpayer has owned and used such property as the taxpayer's personal residence, the aggregate periods for which such other residence had been so owned and used.

     L.1998, c.3, s.1.

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Last modified: March 23, 2014