SECTION 2. BACKGROUND

.01 Section 1031(a) provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment (relinquished property) if the property is exchanged solely for property of like kind that is to be held either for productive use in a trade or business or for investment (replacement property). Under § 1.1031(a)–(1)(a)(1) of the Income Tax Regulations, property held for productive use in a trade or business may be exchanged for property held for investment, and property held for investment may be exchanged for property held for productive use in a trade or business.

.02 Rev. Rul. 59–229, 1959–2 C.B. 180, concludes that gain or loss from an exchange of personal residences may not be deferred under § 1031 because the residences are not property held for productive use in a trade or business or for investment.

.03 Section 2.05 of Rev. Proc. 2005–14, 2005–1 C.B. 528, states that § 1031 does not apply to property that is used solely as a personal residence.

.04 In Moore v. Commissioner, T.C. Memo. 2007–134, the taxpayers exchanged one lakeside vacation home for another. Neither home was ever rented.

§ 6017 to file an income tax return nevertheless file to obtain refunds of withheld tax ( e.g., tax withheld on wages under § 31 of the Code).

Eligibility for the 2008 economic stimulus payment, and the amount of that payment, is based on information reported on the taxpayer’s filed income tax return for 2007. See § 6428(g). Thus, individuals who are required by § 6012(a) or § 6017 to file an income tax return, or who file to obtain a refund of withheld tax, will not need to file any extra forms or call the Service to request the payment in 2008. However, eligible individuals with qualifying income not already reported on their filed 2007 income tax return ( e.g., certain disability or survivor benefits from the Department of Veterans Affairs) may need to file an amended return in some situations to receive a larger stimulus payment.

Many individuals with low earned income or other qualifying income ( e.g., social security benefits, Tier 1 railroad retirement benefits, and certain disability or survivor benefits from the Department of Veterans Affairs) may not be required by § 6012(a) to file an income tax return and may not file an income tax return to receive a refund of withheld taxes. This notice informs these individuals of the minimum filing necessary to obtain the economic stimulus payment in 2008.

DISCUSSION

Section 6428(g)(1) of the Code treats an eligible individual as having made a payment in 2007 against the income tax in an amount equal to the amount of the economic stimulus payment. Thus, the amount of the 2008 economic stimulus payment is treated as an overpayment of tax for 2007 which, as provided in § 6428(g)(3), the Service is directed to refund or credit to the eligible individual.

Section 6402 of the Code and § 301.6402–3 of the Regulations on Procedure and Administration authorize taxpayers to seek a refund or credit of overpaid income tax by filing a properly executed individual income tax return. In the case of an eligible individual (or married couple filing jointly) who is not required by § 6012(a) or § 6017 to file an income tax return, but who had qualifying income in 2007 that equals or exceeds $3,000, the Service will treat a Form 1040A prepared

in the following manner as a valid claim for refund in the amount of the 2008 economic stimulus payment:

1. In the blank space at the top of page 1 of Form 1040A, eligible individuals should write the words “Stimulus Payment” above the title of the form.

2. Eligible individuals should enter names, mailing address, and social security numbers on the appropriate lines of Form 1040A and should enter filing status and exemption information on lines 1 through 6d of the form.

3. Eligible individuals should enter wages and other compensation (including net earnings from self-employment) received in 2007 on line 7 of Form 1040A.

4. Eligible individuals should enter qualifying income received in 2007 in the form of social security benefits, Tier 1 railroad retirement benefits and certain veterans’ disability or survivor benefits on line 14a of Form 1040A. Individuals who do not have documentation of the exact amount of these government-provided benefits may estimate their annual benefit by multiplying their monthly benefit, prior to any deductions for withheld taxes or Medicare premiums, by the number of months during 2007 that they received the benefit.

5. Eligible individuals who are members of the Armed Forces of the United States should enter any nontaxable combat zone compensation received in 2007 that they elect to treat as earned income on line 40b of Form 1040A.

6. Eligible individuals who request direct deposit of their economic stimulus payment into their account at a bank or other financial institution should complete lines 44b through 44d of Form 1040A. Eligible individuals may not request a deposit of the stimulus payment into an account that is not in the eligible individual’s name.

7. Eligible individuals should sign and date the form under the penalties of perjury statement, and should enter the identifying information of any third party designee or paid preparer, if applicable, at the bottom of page 2 of Form 1040A.

Based on the information provided on Form 1040A, the Service will compute the amount of the stimulus payment that will be refunded or credited.

March 10, 2008 547 2008–10 I.R.B.

.03 Personal use . For purposes of this revenue procedure, personal use of a dwelling unit occurs on any day on which a taxpayer is deemed to have used the dwelling unit for personal purposes under § 280A(d)(2) (taking into account § 280A(d)(3) but not § 280A(d)(4)).

.04 Fair rental . For purposes of this revenue procedure, whether a dwelling unit is rented at a fair rental is determined based on all of the facts and circumstances that exist when the rental agreement is entered into. All rights and obligations of the parties to the rental agreement are taken into account.

.05 Special rule for replacement prop- erty . If a taxpayer files a federal income tax return and reports a transaction as an exchange under § 1031, based on the expectation that a dwelling unit will meet the qualifying use standards in section 4.02(2) of this revenue procedure for replacement property, and subsequently determines that the dwelling unit does not meet the qualifying use standards, the taxpayer, if necessary, should file an amended return and not report the transaction as an exchange under § 1031.

.06 Limited application of safe harbor . The safe harbor provided in this revenue procedure applies only to the determination of whether a dwelling unit qualifies as property held for productive use in a trade or business or for investment under § 1031. A taxpayer utilizing the safe harbor in this revenue procedure also must satisfy all other requirements for a likekind exchange under § 1031 and the regulations thereunder.