TAX BULLETIN 2018-1: TAX REFORM SIGNED INTO LAW a Roth conversion. From the current language of the effective date, it is unclear whether this would prevent a 2017 Roth conversion from being recharacterized in 2018. e Taxation of alimony. Under 2017 law, alimony and separate maintenance payments were deductible by the payor and includible in income by the recipient. (Child support payments are not treated as alimony.) The House bill proposed to reverse this treatment, making alimony and separate maintenance payments non-deductible to the payor and non-taxable to the recipient. The Senate bill had no similar provision. The Act generally follows the House bill but delays the effective date by one year, generally being effective for any divorce or separation instrument executed after December 31, 2018. e = ©Sale of principal residence exclusion. Under 2017 law, up to $250,000 of gain ($500,000 if filing jointly) on the sale of a principal residence could be excluded from income. Among the requirements is that the principal residence be owned and used as your principal residence for two out of the last five years. You could use this rule only once every two years. This exemption was available regardless of income. Both the House and Senate Bills proposed that (i) the principal residence must be owned and used as your principal residence for five out of the last eight years and (ii) you can use this rule only once every five years. The House proposal also contained a limit to the exclusion if income exceeded a certain amount. In a surprise, none of these modifications were included in the Act. As a result, no changes were made to the principal residence exclusion rules. e Identification of securities sold, exchanged and gifted. Gain or loss generally is recognized for Federal income tax purposes on the sale of property. A taxpayer’s gain or loss on a disposition of property is the difference between the amount realized on the sale and the taxpayer’s cost basis in the