TheMIGroup supports Worldwide ERC's position based on the long awaited IRS Revenue Ruling 2005-74 pertaining to home sale programs

The Worldwide ERC is a leading industry resource supporting corporations, individuals and service providers throughout the world. As a continued member of Worldwide ERC, TheMIGroup supports ERC's position on Revenue Ruling 2005-74.

The relocation industry has patiently awaited an IRS ruling on home sale programs for 30 years. The issuance of Revenue Ruling 2005-74 on November 30, 2005 is ground breaking news for the relocation industry.

Worldwide ERC Coalition tax counsel Peter K. Scott stated on Dec 1, 2005, that the ruling provides support of Appraised Value and Amended Value transactions. Mr. Scott also stated that the transactions must conform to the 11 Key Elements created by the ERC in 1985. In addition, the ruling determined that the use of a blank deed is acceptable in such transactions, with the exception of various states that may require a two deed process.

Key points noted by the Worldwide ERC Webinar:

• Safe harbor for 11 Key Elements of a conforming Appraised Value/Amended Value (AV) transaction
• Use of the blank deed in itself does not create a taxable transaction
• Revenue Ruling 2005-74 does not mention a holding period for homes, though it is thought to be viewed as favorable to avoid very short holding periods
• Revenue Ruling 2005-74 is retroactive, shielding programs that have conformed previously
• Buyer value option home sale program was not specifically mentioned in the ruling however, ERC noted that not being mentioned is favorable and recommends that the 11 Key Elements should be strictly followed (same procedure as an AV transaction, but without the initial offer). ERC stated it is advisable to add a delayed Appraised Value benefit to existing BVO programs
• Revenue ruling 2005-74 described a transaction that will be treated as taxable based on the Amdahl case. While the facts and analysis are not clear at this point, the "bad" facts appear to be: 1) First sale contract is contingent on employer entering into the second. 2) Employee negotiates terms of the employer's sale. 3) Proceeds are not paid to the employee until the second sale closes

To view the IRS ruling in its entirety and the Worldwide ERC Coalition's description and analysis, please refer to the Worldwide ERC website.

We recommend you consult your tax/ legal advisor in regard to this ruling and any other matters regarding your home sale program.