Repeal of Tax Benefits on Some Second Homes Seen Adding Complexity
August 11, 2008, BNA Daily Tax

Under the Housing and Economic Recovery Act of 2008, owners of second homes can now expect to pay a capital gains tax if that home was previously used as a vacation property.  As reported in BNA Daily Tax, the US Congressional Joint Committee on Taxation has stated the change will raise approximately $1.4 billion in the next ten years.  However, some tax practitioners disagree.

"Congress is targeting something very specific. They were going for people who own a bunch of houses, who move into them and then sell them off, and do it over and over again," said John Olivieri, a partner in the Tax Practice at White & Case in New York.

Olivieri said in order for the sum of $1.4 billion to be reached, it would require 19,000 transactions in which the full 15 percent capital gains tax was paid on $500,000. "I would question that number,” he said.  "They're counting on a lot of people to do that type of transaction, and I'm not sure they're out there, especially in this housing market. I'm not even sure that kind of gain is going to be there for a lot of people."