BVO with Sunset Clause

Organizations who use a Buyer Value Option home sale program should consider incorporating a “sunset clause”.

Despite the decline in audits since the issuance of IRS Revenue Ruling 2005-74 in 2005 they still do occur throughout the United States. IRS agents continue to question whether a stand-alone Buyer Value Option (BVO) home sale program meets the requirements of the Ruling, specifically whether the lack of appraisals and a guaranteed offer at any point before an outside buyer’s offer is received disqualifies the program.

The results, on audits and IRS appeals, have been mixed. A BVO program that meets all the approved procedures of an Amended Value (AV) program, except for the buyout offer based on appraisals, should be held within Rev. Rul. 2005-74. Two separate sales should occur, and costs should not be treated as earnings to the employee.

Companies need to find their own comfort level, balancing the risks versus the costs when establishing the home sale benefits for their employee’s.

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