New IRS Ruling on Employer-Sponsored Home Buyout Programs

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Published by New York State Society of Certified Public Accountants in The CPA Journal, volume 76 issue 11, 2006. Bryant users may access this article here.


New York State Society of Certified Public Accountants

Publication Source

The CPA Journal


Companies doing business internationally need a global business plan that includes maintaining a mobile workforce. The relocation industry has been patiently awaiting a favorable ruling on the taxability of home sale/purchase transactions. Revenue Ruling 2005-74, which has been anticipated for more than 30 years, represents an important win for the industry. Since 1972, in Revenue Ruling 72-339, the IRS has maintained that if an employer-sponsored relocation home sale program is viewed as two separate sales, then there are no payroll tax consequences for the employee following the second sale. As an alternative to using a home buyout program offered by a relocation management company, an employer could offer a transferred employee an employee-relocation loan or a bridge loan. To avoid unfavorable tax consequences, employer-sponsored home purchase buyout programs should avoid contingent sales that allow employees to negotiate the terms of the final sale.