SENIOR ASSEMBLY FEDERAL PROPOSAL NO. 6

INTRODUCED BY SENIOR ASSEMBLY MEMBER LOPES

LEGISLATIVE COUNSEL’S DIGEST

AFP 6: SURVIVING SPOUSE: FEDERAL INCOME TAX EXCLUSION: HOME SALE GAINS.

UNDER EXISTING LAW, MARRIED PERSONS FILING A JOINT INCOME TAX RETURN MAY EXCLUDE FROM INCOME $500,000 OF THE GAIN REALIZED FROM THE SALE OF A PRINCIPAL RESIDENCE, WHILE A PERSON FILING AN INDIVIDUAL RETURN MAY EXCLUDE ONLY $250,000 OF THIS GAIN.

THIS MEASURE WOULD MEMORIALIZE THE CONGRESS AND PRESIDENT TO ENACT LEGISLATION THAT WOULD AUTHORIZE CERTAIN SURVIVING SPOUSES WHO FILE AN INDIVIDUAL RETURN TO EXCLUDE FROM INCOME $500,000 OF THE GAIN REALIZED FROM THE SALE OF A PRINCIPAL RESIDENCE, AS SPECIFIED.

VOTE: MAJORITY.

AFP 6: RELATING TO FEDERAL INCOME TAX

WHEREAS, THE DEATH OF A SPOUSE IS A TRAUMATIC EVENT OFTEN LEAVING THE SURVIVING SPOUSE WITH MANY DECISIONS NEVER BEFORE FACED; AND

WHEREAS, THE SURVIVING SPOUSE MAY WANT TO SELL THE HOME IMMEDIATELY, BUT MAY NOT HAVE ANY PLACE TO GO AND BECAUSE THE HOME MAY NOW BE TOO LARGE TO MAINTAIN ALONE; AND

WHEREAS, THE SURVIVING SPOUSE MAY WISH TO LEAVE THE HOME BECAUSE OF THE NEGATIVE IMPACT OCCASIONED BY THE DEATH OF THE OTHER SPOUSE; AND

WHEREAS, THE SURVIVING SPOUSE MAY NOT WANT TO SELL AT ALL BECAUSE OF FAMILY AND FRIENDS LIVING CLOSE BY WHO MAY BE AVAILABLE TO HELP; AND

WHEREAS, ALLOWING A SURVIVING SPOUSE TO RETAIN THE $500,000 CAPITAL GAIN INCOME EXCLUSION FOR TWO YEARS MAY ENCOURAGE A SURVIVING SPOUSE TO SELL, AND THEREFORE, BENEFIT FROM LARGER CASH PROCEEDS; AND

WHEREAS, LOCAL TAXING AGENCIES WOULD ALSO BENEFIT WITH HIGHER PROPERTY TAXES IMPOSED ON THE PROPERTY AFTER THE SALE; AND

WHEREAS, FAMILIES OF A SURVIVING SPOUSE MAY ALSO BENEFIT KNOWING THEY WOULD NOT BE OBLIGATED FOR FINANCIAL SUPPORT IF THE SURVIVING SPOUSE HAS SUFFICIENT MAINTENANCE FUNDS; AND WHEREAS,

ALLOWING A SURVIVING SPOUSE TO RETAIN THE $500,000 CAPITAL GAIN INCOME EXCLUSION IS OF GREATER VALUE TO THE INDIVIDUAL AND TO SOCIETY AS A WHOLE WHEN COMPARED TO THE INCOME THAT MAY BE LOST TO ALL TAXING AGENCIES; AND

WHEREAS, THE INCOME LOST TO ALL TAXING AGENCIES PALES COMPARED TO THE ECONOMIC AND HUMANE BENEFIT RETAINED BY THE SURVIVING SPOUSE; NOW, THEREFORE, BE IT

RESOLVED, BY THE SENIOR ASSEMBLY AND THE SENIOR SENATE, JOINTLY, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA AT ITS 2006 REGULAR SESSION, A MAJORITY OF THE MEMBERS VOTING THEREFOR, HEREBY PROPOSES THAT IF EITHER SPOUSE IS 60 YEARS OR OLDER AT TIME OF DEATH, THE $500,000 CAPITAL GAIN INCOME EXCLUSION BE EXTENDED FOR TWO YEARS AFTER THE DEATH OF A SPOUSE IN THE EVENT THE SURVIVING SPOUSE SELLS THE HOME WITHIN THIS TWO YEAR PERIOD; AND BE IT FURTHER

RESOLVED, THAT THE SENIOR LEGISLATURE OF THE STATE OF CALIFORNIA RESPECTFULLY MEMORIALIZES THE CONGRESS AND THE PRESIDENT TO ENACT APPROPRIATE LEGISLATION THAT WOULD ADDRESS THE CONCERNS SET FORTH IN THIS MEASURE; AND BE IT FURTHER

RESOLVED, THAT A COPY OF THIS MEASURE BE TRANSMITTED TO THE PRESIDENT AND VICE PRESIDENT, THE SPEAKER OF THE HOUSE OF REPRESENTATIVES, THE CHAIRPERSONS OF THE HOUSE AND SENATE COMMITTEES ON AGING, AND TO EACH SENATOR AND REPRESENTATIVE FROM CALIFORNIA IN THE CONGRESS OF THE UNITED STATES.

RN20061900503

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