Divorced Couple

[S T]

Question, I have a divorced couple and a sale of the Personal Residence. My taxpayer (husband) has been out of the home since Sept 2007 - took this long and he actually had to go to court to force the sale of the primary residence which was transacted August 2010.

I need to report the sale on the husband's (my taxpayer's) return as we have a 1099S
Original purchase 1/6/2005 - husband vacated 9/2007 so do I meet the 2 years out of 5 with a sale date of August 2010?

Report as a sale of personal residence or Sale of Reg Prop on Schedule D?? It is a loss, and I recognize the loss is not deductible - just want to report the transaction. No taxable income and no loss.

Best Advice?

Thanks

Sandy

[Koss]

Sale of Principal Residence

The question of whether your client has met the "two out of five years" requirement does not arise, because there is no gain. The "two out of five" test is only used to determine whether gain on the sale of your main home can be excluded. Because there is no gain, the test is irrelevant.

A loss needs to be reported on Schedule D.

According to IRS Publication 523, Selling Your Home,

Reporting the Sale

Do not report the 2010 sale of your main home on your tax return unless:

- You have a gain and do not qualify to exclude all of it,

- You have a gain and choose not to exclude it, or

- You have a loss and received Form 1099-S.

If you have any taxable gain on the sale of your main home that cannot be excluded, report the entire gain (line 5 of Worksheet 2) on Schedule D (Form 1040). Report it on line 1 or line 8 of Schedule D, as short-term or long-term capital gain depending on how long you owned the home. If you qualify for an exclusion (line 9 of Worksheet 2), show it on the line directly below the line on which you report the gain. Enter “Section 121 exclusion” in column (a) of that line and show the amount of the exclusion in column (f) as a loss (in parentheses).

If you have a loss on the sale of your main home for which you received a Form 1099-S, you must report the loss on Schedule D even though the loss is not deductible. Report the transaction on line 1 or 8, as above. Complete columns (a) through (e). Enter -0- in column (f).

A loss cannot be "excluded." The loss must be reported, regardless of whether a gain could have been excluded.

On the plus side, he's not using up any of his gain...



BMK

[S T]

Many Thanks

Thanks Burton,
Guess I just need some nudges to remember - a complex return with many divorce issues, so sometimes can not see the "forest for the Trees"

Glad you are here posting to assist us

Sandy