Transcript Lesson 13 Sale of Home

Lesson 13
Sale of Home
Objectives
• Determine if the taxpayer meets the
ownership and use tests
• Determine whether a home is the
taxpayer’s main home
• Determine when the ownership and use
tests may be suspended
• Determine the amount of gain eligible
for exclusion from income
Intake/Interview Process
Form 13614 – Intake and Interview Sheet Income Section
Requirements for Exclusion
Exclude up to $250,000 ($500,000 if MFJ) of
gain on the sale of main home if the
following requirements are met:
• Ownership Test (either spouse, if married)
• Use Test (both spouses, if married)
• Have not excluded gain in the past 2 years
(neither spouse, if married)
• File a joint return, if married
Ownership & Use Tests
During the 5-year period before the sale:
– Owned the home for at least 2 years, and
– Lived in the home (as a main home) for at
least 2 years
“Main” Home
• The home a taxpayer lives in most of the
time is considered a main home
• Main home can be a:
−House
−Boat
−Mobile home
−Cooperative apartment
−Condominium
Reporting the Exclusion
• Eligible taxpayers do not report the sale
of a main home on a tax return unless:
− The gain exceeds the exclusion amount, or
− The taxpayer chooses not to exclude it
• Report taxable gains on the sale of a
main home on Schedule D, Form 1040
Loss on the sale of a main
home is not deductible!
Test Period Suspended
Members of armed forces can suspend
the 5-year test period of the ownership
and use tests if:
– Serving on “qualified official extended
duty”
– Period of suspension doesn’t exceed 10
years
– Not more than one property at a time is
being suspended
Gain on Sale of Main Home
Gain = Amount Realized – Adjusted Basis
• Amount Realized
− Total selling price, less
− Selling expenses (commissions, fees,
advertising)
• Adjusted Basis
− Basis (usually cost), plus
− Capital improvements
Quality Review (QR)
Form 8158 – Quality Review Checklist Income Section
Lesson Summary
• Eligible taxpayers may exclude up to
$250,000 ($500,000, if MFJ) gain on the sale
of their main home
• Taxpayers must meet the ownership and use
tests to qualify for exclusion
• A main home is the home the taxpayer lives
in most of the time
• Do not report gains that qualify for exclusion
• Losses are not deductible