Certification for No Information Reporting on the Sale of a Principal Residence

SEC. 6. EFFECT ON OTHER
DOCUMENTS
Rev. Proc. 95–35, 1995–2 C.B. 391,
and Rev. Proc. 95–35A, 1995–2 C.B. 392,
are superseded.
PAPERWORK REDUCTION ACT
The collection of information contained in this revenue procedure has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507) under control number
1545–1589.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the collection of information displays a valid
OMB control number.
The collection of information in this
revenue procedure is in section 5.06. This
revenue procedure provides guidance to
organizations exempt from taxation under
§ 501(a) of the Internal Revenue Code of
1986 on certain exceptions from the reporting and notice requirements of
§ 6033(e)(1) and the tax imposed by
§ 6033(e)(2). It identifies certain tax-exempt organizations that are treated as satisfying the requirements of § 6033(e)(3)
and are thus not subject to the reporting
and notice requirements of § 6033(e)(1)
or the tax imposed by § 6033(e)(2), and
provides procedures for other exempt organizations to establish that they satisfy
the requirements of § 6033(e)(3). The information maintained by exempt organizations will be used in determining
whether they meet the exception provided
under § 6033(e)(3). The record retention
and annual reporting are required to assure compliance with the requirements of
§ 6033(e). The likely respondents are social welfare organizations exempt under
§ 501(c)(4), agricultural and horticultural
organizations exempt under 501(c)(5),
and business leagues exempt under
§ 501(c)(6) that wish to establish that they
receive substantially dues from members
who do not claim a deduction for their
dues payments under § 162, without regard to § 162(e).
The estimated total annual recordkeeping burden is 150,000 hours.
The estimated annual burden per organization varies from 1 hour to 100 hours,
depending on individual circumstances,
with an estimated average of 10 hours.

February 17, 1998

The estimated number of organizations
required to maintain records is 15,000.
Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal
revenue law. Generally, tax returns and
tax return information are confidential, as
required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue procedure is Thomas J. Miller of the Exempt
Organizations Division. For further
information regarding this revenue procedure contact Mr. Miller on (202) 6227867 (not a toll-free call).

26 CFR 601.602: Tax forms and instructions.
(Also Part I, Section 6045; 1.6045-4; section 121)

Rev. Proc. 98–20
SECTION 1. PURPOSE
This revenue procedure sets forth the
acceptable form of the written assurances
(certification) that a real estate reporting
person must obtain from the seller of a
principal residence to except such sale or
exchange from the information reporting
requirements for real estate transactions
under § 6045(e)(5) of the Internal Revenue Code.

or exchange of a residence from the
§ 6045(e) information reporting requirements if the seller provides the real estate
reporting person with a certification setting forth certain written assurances, including an assurance that the residence is
the seller’s principal residence (within the
meaning of § 121) and an assurance that
the full amount of the gain on the sale or
exchange of the principal residence is excludable from gross income under § 121.
.03 Section 312 of the Act also
amended § 121 to provide new rules for
the exclusion of gain on certain sales or
exchanges of a principal residence. Section 121, as amended, provides that a taxpayer may exclude from gross income up
to $250,000 of gain on the sale or exchange of a principal residence if certain
conditions are met. In certain circumstances, a married individual filing a joint
return for the taxable year of the sale or
exchange may exclude from gross income
up to $500,000 of gain. This exclusion
also applies to the sale or exchange of
stock held by a tenant-stockholder in a cooperative housing corporation (as defined
in § 216) and may apply to the sale or exchange of a remainder interest in a principal residence if the taxpayer so elects.
SECTION 3. SCOPE
This revenue procedure applies to the
information reporting requirements under
§ 6045(e) for a sale or exchange of a principal residence.

SECTION 2. BACKGROUND

SECTION 4. SELLER CERTIFICATION

.01 Section 6045(e) and § 1.6045–4 of
the Income Tax Regulations generally require a real estate reporting person (as defined in § 6045(e)(2) and § 1.6045–4) to
file an information return regarding a real
estate transaction and to furnish a payee
statement to the seller regarding that
transaction. The information return and
statement must include the name, address,
and taxpayer identification number (TIN)
of the seller, and the gross proceeds of the
real estate transaction. This information
is reported on Form 1099-S, Proceeds
From Real Estate Transactions.
.02 Section 312 of the Taxpayer Relief
Act of 1997 (the Act), Pub. L. No. 105–
34, 111 Stat. 788 (August 5, 1997), effective for sales or exchanges after May 6,
1997, amended § 6045(e) by adding a
new paragraph (5), which excepts a sale

.01 To be excepted from the information reporting requirements in § 6045(e)
on the sale or exchange of a residence (including stock in a cooperative housing
corporation), the real estate reporting person must obtain from the seller a written
certification, signed by the seller under
penalties of perjury, that assurances (1)
through (4) set forth in section 4.02 of this
revenue procedure are true. For purposes
of this certification, the term “seller” includes each owner of the residence that is
sold or exchanged. Thus, if a residence
has more than one owner, a real estate reporting person must either obtain a certification from each owner (whether married
or not) or file an information return and
furnish a payee statement for any owner
that does not make the certification.
.02 The assurances are:

32

1998–7 I.R.B.

(1) The seller owned and used the
residence as the seller’s principal residence for periods aggregating 2 years or
more during the 5-year period ending on
the date of the sale or exchange of the residence.
(2) The seller has not sold or exchanged another principal residence during the 2-year period ending on the date
of the sale or exchange of the residence
(not taking into account any sale or exchange before May 7, 1997).
(3) No portion of the residence has
been used for business or rental purposes
by the seller (or the seller’s spouse if the
seller is married) after May 6, 1997.
(4) At least one of the following
three statements applies:
The sale or exchange is of the entire residence for $250,000 or less.
OR
The seller is married, the sale or
exchange is of the entire residence for
$500,000 or less, and the gain on the
sale or exchange of the entire residence
is $250,000 or less.
OR
The seller is married, the sale or
exchange is of the entire residence for
$500,000 or less, and (a) the seller intends to file a joint return for the year of
the sale or exchange, (b) the seller’s
spouse also used the residence as his or
her principal residence for periods aggregating 2 years or more during the 5year period ending on the date of the
sale or exchange of the residence, and
(c) the seller’s spouse also has not sold
or exchanged another principal residence during the 2-year period ending
on the date of the sale or exchange of the
residence (not taking into account any
sale or exchange before May 7, 1997).
SECTION 5. FORMAT FOR MAKING
SELLER CERTIFICATION
A sample certification form that may be
used by a real estate reporting person to
obtain the applicable assurances from the
seller is provided in the Appendix of this
revenue procedure. However, use of this
sample certification form is not required.
The requirements of the certification
under § 6045(e)(5) will be met if the content and wording of a written certification
provide the same information as required
by section 4.02 of this revenue procedure.

1998–7 I.R.B

SECTION 6. OBTAINING AND
RETAINING SELLER
CERTIFICATION
.01 General rule. Except as provided
in section 6.02 of this revenue procedure,
the real estate reporting person may obtain a certification at any time on or before January 31 of the year following the
year of the sale or exchange of the residence. The certification must be retained
by the real estate reporting person for 4
years after the year of the sale or exchange of the residence to which the certification applies.
.02 Transition rule. For a sale or exchange of a residence occurring after May
6, 1997 and on or before December 31,
1997, the real estate reporting person may
obtain a certification at any time on or before February 28, 1998.
SECTION 7. PENALTIES
A real estate reporting person who relies on a certification made in compliance
with this revenue procedure will not be liable for the penalties under § 6721 for
failure to file an information return, or
under § 6722 for failure to furnish a payee
statement to the seller, unless the real estate reporting person has actual knowledge that any assurance is incorrect.
SECTION 8. COMMENTS INVITED
The Service requests comments on any
additional guidance that may be needed
under §§ 6045(e)(5) and 121. Comments
should be submitted by April 30, 1998, to:
Internal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044, Attn: CC:DOM:CORP:R (IT&A
Branch 2), Room 5226. Submissions may
be hand-delivered between the hours of 8
a.m. and 5 p.m. to: Courier’s Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW, Washington, DC, Attn:
CC:DOM:CORP:R (IT&A Branch 2),
Room 5226. Alternatively, taxpayers may
submit comments electronically at
http://www.irs.ustreas.gov/prod/tax
regs/comments.html
(the Service’s internet site). All comments submitted will be available for public inspection and copying.

sales or exchanges of a residence occurring after May 6, 1997.
SECTION 10. PAPERWORK
REDUCTION ACT
The collections of information contained in this revenue procedure have
been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act
(44 U.S.C. 3507) under control number
1545–1592.
An agency may not conduct or sponsor,
and a person is not required to respond to,
a collection of information unless the collection of information displays a valid
OMB control number.
The collection of information in this
revenue procedure is in sections 4 and 5
of this revenue procedure. This information is required to exempt a real estate reporting person from the requirement to
file an information return and furnish a
payee statement reporting the sale or exchange of a principal residence. The
likely respondents are individual taxpayers who sell or exchange a principal residence and real estate businesses.
The estimated total annual reporting
burden for respondents is 383,000 hours.
The estimated burden per respondent is
10 minutes. The estimated number of respondents is 2,300,000. The frequency of
responses is on occasion.
The estimated total annual burden for
recordkeepers is 37,500 hours.
The estimated annual burden per
recordkeeper is 25 minutes. The estimated number of recordkeepers is 90,000.
Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal
revenue law. Generally, tax returns and
return information are confidential, as required by 26 U.S.C. 6103.
DRAFTING INFORMATION
The principal author of this revenue
procedure is Sharon Hester of the Office
of Assistant Chief Counsel (Income Tax
and Accounting). For further information
regarding this revenue procedure, contact
Ms. Hester at (202) 622-4920 (not a tollfree call).

SECTION 9. EFFECTIVE DATE
This revenue procedure is effective for

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February 17, 1998

APPENDIX
CERTIFICATION FOR NO INFORMATION REPORTING
ON THE SALE OR EXCHANGE OF A PRINCIPAL RESIDENCE
This form may be completed by the seller of a principal residence. This information is necessary to determine whether the sale or
exchange should be reported to the seller, and to the Internal Revenue Service on Form 1099-S, Proceeds From Real Estate Transactions. If the seller properly completes Parts I and III, and makes a “yes” response to assurances (1) through (4) in Part II, no information reporting to the seller or to the Service will be required for that seller. The term “seller” includes each owner of the residence
that is sold or exchanged. Thus, if a residence has more than one owner, a real estate reporting person must either obtain a certification from each owner (whether married or not) or file an information return and furnish a payee statement for any owner that does
not make the certification.
Part I. Seller Information
1.

Name

2.

Address or legal description (including city, state, and ZIP code) of residence being sold or exchanged

3.

Taxpayer Identification Number (TIN)

Part II. Seller Assurances
Check “yes” or “no” for assurances (1) through (4).
Yes

No

u

u

(1)

I owned and used the residence as my principal residence for periods aggregating 2 years or more during
the 5-year period ending on the date of the sale or exchange of the residence.

u

u

(2)

I have not sold or exchanged another principal residence during the 2-year period ending on the date of
the sale or exchange of the residence (not taking into account any sale or exchange before May 7, 1997).

u

u

(3)

No portion of the residence has been used for business or rental purposes by me (or my spouse if I am
married) after May 6, 1997.

u

u

(4)

At least one of the following three statements applies:

The sale or exchange is of the entire residence for $250,000 or less.
OR
I am married, the sale or exchange is of the entire residence for $500,000 or less, and the gain on the sale
or exchange of the entire residence is $250,000 or less.
OR
I am married, the sale or exchange is of the entire residence for $500,000 or less, and (a) I intend to file a
joint return for the year of the sale or exchange, (b) my spouse also used the residence as his or her principal residence for periods aggregating 2 years or more during the 5-year period ending on the date of the sale or exchange
of the residence, and (c) my spouse also has not sold or exchanged another principal residence during the 2-year
period ending on the date of the sale or exchange of the residence (not taking into account any sale or exchange before May 7, 1997).
Part III. Seller Certification
Under penalties of perjury, I certify that all the above information is true as of the end of the day of the sale or exchange.

Signature of Seller

February 17, 1998

Date

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1998–7 I.R.B.