Capital Gain on primary residence - Would this qualify as a unforeseen event?

[jessicadavis91711]

My husband and I are thinking about selling our home but we have only been in it for 15 months and we will likely make about $100K in profit.  We built a home on 2 acres and walked the property multiple times in the year that it took to build.  The entire 2 acres had weeds and pasture grass.  We moved in late September so the winter months followed but in early spring, cocklebur and goat head plants grew extremely heavy on the new dirt.  We spent every weekend in the spring spraying the weeds and pulling the weeds but it didn't help.  Once the plants dried out, the stickers broke off and they turned into seeds and we cannot go outside without dozen of stickers getting stuck everywhere.  We have a dog and 2 young kids and we have resulted to only letting them out front where the builder did the minimal landscaping that was required by our HOA.  My dog has had several stuck in her paws and we worry that she will get a thorn stuck and an infection would spread.  It is 100% unavoidable to not track them inside so I have also found them in my sons (16 month old) mouth or stuck on his clothes.  We have a hot tub and a trampoline that we cannot use because if you walk 5 feet from our door you have at least 10 stuck in your shoes.  

We custom built our dream home so we really do not want to move, but we do not have the money to get rid of the stickers.  After talking with several professionals, we would need to have an excavator take the top soil and all sticker plants away, add new soil and put down sod and/or rock (with a ground cover) down.  The estimate we received was over $50,000 because these cover over one acre of land.   We cannot afford this and we are unable to use our land without doing so.  

Would this qualify as an unforeseen event since we had no knowledge of this before purchasing our home?  If so, what kind of proof would be adequate in an audit?

[Carl]

Would this qualify as an unforeseen event since we had no knowledge of this before purchasing our home?

Nope, not in any way, form or fashion. So if you change your primary residence even one day shy of 2 years (730 days) you flat out will not qualify for the capital gains tax exclusion.

I find it inconceivable that you are being told to remove top soil and all that stuff. I get the strong impression you're being flat out lied to. With winter approaching, for now you should only concern yourself with the lawn you actually use. I seriously doubt you utilize every square inch of 2 acres on a recurring basis. Based on your description, it sounds like what you have if spurweed. The thorny stickers are the seed. They drop in the fall if not pulled off by sticking to something passing by - such as a pet or a person who gets them on their shoes and pant legs.

With the cold season approaching now is the perfect time to do two things.

1) Cut the grass as absolutely low as your mower will let you get away with and not bend the blade. When you cut *BAG IT* and then *THROW IT*. Now you probably use a bushhog for that much land. For getting this cleaned up you're better off using a riding mower with a bag on the discharge chute, and the deck set to it's absolute lowest level.

2) Put down a pre-emergent *NOW*. Bayer has a number of pre-emergent herbicides for different problems.

3) Then in Feb-March timeframe, the first day the temperature gets above 65, put down another treatment of pre-emergent herbicide and keep the lawn cut as low as possible, always bagging the clippings. At a minimum you'll need to cut that lawn every week, and do so religiously weather you think it needs cutting or not. As stated before, every time you cut, bag the clippings and throw them away.

4) After no less than 4 cuts next spring, if you have any semblance of real grass in the lawn, then you can fertilize with a weed and feed mixture. Scotts makes a descent formula they call of all things, "Weed & Feed". But when you do fertilize, put it down at only one half of the instructions on the bag. So if one bag covers 500 sq ft, you'll spread that one bag over 1000 sq feet.

Now, if you do the above starting now and don't forget about steps 3 and 4 in the early spring, you won't have a good looking lawn next summer. But you won't be tracking spurs and other "sticky seeds" into the house either. By keeping the lawn cut as low as possible, you prevent the weeds the opportunity to grow enough to produce those "sticker seeks". For the seeds that have dropped already, the pre-emergent right now, and another pre-emergent treatment in the spring will prevent those seeds from sprouting new growth.

If you want to talk about this more please feel free to private message me. I've more information to offer and would like to see pictures. but the public part of this forum is not the right place for this, since I'm way off the purpose and intent of this forum. 🙂

[HollyP]

@Carl is correct, this will not likely qualify as an unforeseen event. The Treasury Regulations state, "a sale or exchange by reason of unforeseen circumstances...does not qualify for the reduced maximum exclusion if the primary reason for the sale of exchange is a preference for a different residence or an improvement in financial circumstances." See TR § 1.121-3 here for more info. It sounds like the main reason that you want to sell the home is because your family would prefer a lawn without weeds. The question then becomes whether the IRS will consider having weeds on your property to be an unforeseen circumstance or if it will instead consider that to be a preference. 

The IRS may take into consideration the factors below to determine if the facts and circumstances rise to the level of an unforeseen event. See Pub 523 for more info.

• The situation causing the sale arose during the time you owned and used your property as your residence.

• You sold your home not long after the situation arose.

• You couldn’t have reasonably anticipated the situation when you bought the home.

• You began to experience significant financial difficulty maintaining the home.

• The home became significantly less suitable as a main home for you and your family for a specific reason.

[jessicadavis91711]

Thank you. Those final bullets were what I had been researching as well. How would I find out if they would take those into consideration?

[Carl]

Overall it's a moot point to pursue from a tax standpoint, when the situation can be alleviated in 18-24 months for less than $1000. I know this because I've been through it personally. Only difference is, my lawn was over fertilized by the previous owner and the soil was so toxic that only highly acidic loving weeds would grow. I stopped putting down "any" chemicals and fertilizers for several years and spent those years cutting weeds, bagging the clippings and tossing them.  It was the summer of 2017 when soil testing indicated that toxicity levels were less than 1%. I put down a pre-emergent following the instructions in the fall of 2017. Come summer of 2018 the weeds were down by about 90% and the desired St. Augustine grass was working it's way in. I spent that summer cutting and bagging clippings. About a month ago I put down the pre-emergent again and I anticipate that by the end of the summer of 2019 the desired St. Augustine grass will begin overtaking and choking out the weeds. Now I have about 1/2 acre of lawn, and I anticipate in the spring of 2019 that I may need to get 1 pallet of sod which I will checkerboard in the dirt areas of the yard so as to help the natural process along. So even with the cost of a pallet of sod, my total costs of this entire multi-year process will still be under $1000.

Now it's taken me 5-6 years to get my lawn straightened out because my issue was toxins in the soil. Your issue is weeds, stickers and hitchhikers. That can easily be cleared up with proper care and treatment inside of 2 years.

[HollyP]

The only way to know what the IRS will take into consideration when determining if you qualify for partial exclusion from gain on the sale of your home is to study the Treasury Regulations and Private Letter Rulings on this subject. This should help you to better understand the fact patterns and circumstances that rise to the level of an unforeseen event. Then you must use your best judgment to determine if you can successfully prove your situation also qualifies.