Reporting sale of personal residence

[ruthc]

Have a TP who sold his house in 2013. It was originally a gift from parents several years ago and sold in 2013 due to divorce. He did live in the house 2 out of the last 5 years and meets the exclusion test. Without all the info and just going by the figures he told me, I did a quick figure on gain/loss. No doubt has way under the $250K exclusion. It was a real old house worth not too much. I want to make sure my thinking on reporting is correct. So he qualifies for the exclusion of the total gain, he wants to exclude the gain, and did not receive a 1099S for this. I believe we don't have to report it. If that is the case, is there any reason to figure the actual gain/loss right now? Of course it will be needed if he sells another home in the future. The reason I am asking is due to the TP saying his lawyer told him he didn't have to give me any info because it is not reportable on his return (the usual respect lawyers have for tax preparers).

I would have liked to figure the gain/loss even if not reportable, but then again it may not be worth the hassle trying to get all the info. I may not have this client a few years from now so I may not need it.

Thanks for any help!!

[FEDUKE404]

Need to know this first

Three things that impact your decision:

1) Was a Form 1099-S issued?

2) What was the sale price?

3) What was the cost basis? (Remember, you stated this was a gift ! ) Your "It was a real old house worth not too much" needs some clarification.


Generally speaking, if a Form 1099-S is out there, even without any taxable income falling out, you still may prefer to report the sale just to satisfy those IRS computers.


FE

[ATSMAN]

If a 1099-S was issued I recommend a transaction in schedule D (Long term). The difference between the cost basis and sale price goes in the adjustment column so that there is 0 capital gain.

This avoids a CP2000 in my opinion.

[DonB]

Of course it will be needed if he sells another home in the future.

The section 121 exclusion of gain may be used once every two years. Other than this, there is no effect on any future home purchases or sales. If the sale price under the exclusion amount, the ownership, and the 2 year rule are satisfied-- I would not report.


Of life's two certainties, there is only one for which you can get an automatic extension. ~Author Unknown

[ruthc]

Thanks for the comments!

To Feduke404: As noted in the original posting the TP said no 1099 was issued (for whatever that is worth!). The sale price was $135. I saw the house and it is literally a real old house that was not kept up to par. I can put a good guess that it didn't cost more than $50K many years ago. And I'm sure the adjusted basis and/or FMV was real low (for the gift). The bottom line is I am positive that the gain wouldn't be anywhere near the $250K.

To ATSMAN: Even though the TP said no 1099 was received, I planned on checking into this further and if there is one I know that I need to report it.

To DonB: Thanks for reminding me about section 121 and excluding the gain once every 2 years. I need to talk to the TP on this issue because he got remarried and did mention that his new spouse may sell the house they are in now that was the spouse's house.

Thanks for the input from all!!! Have a great weekend!

[ruthc]

Exclusion amount

This TP got married again and lives in the house his new spouse bought several years ago. If the new spouse sells that house in several years (for example) does the amount that the TP excluded from the sale of his home before he got remarried have to be taken into consideration in any way when the new spouse sells the home? Thanks

[mactoolsix]

This TP got married again and lives in the house his new spouse bought several years ago. If the new spouse sells that house in several years (for example) does the amount that the TP excluded from the sale of his home before he got remarried have to be taken into consideration in any way when the new spouse sells the home? Thanks

Ruth - you're really thinking old school here - those rules went out before 2000 - I think 1997?

There is no gain carried from the sale of house, unless it was a sale from prior to 1998, and the seller is still holding that deference. (not sure of the year)
When your client sold the home in 2013, you figure the gain and decide if he wants to use Sec 121.
Keep mind as pointed out prior, if he intends to sell another home within 2 years, he may prefer to not take Sec 121 and save it for possibly excluding a much larger gain next year.

On another thought, I'm curious why several have posted to not report this if there is no 1099-S and the sale would end up a no tax event?
I have always been to told to report everything to get the statute of limitations ticking. Once three years has past the year is closed. But if the event was never reported, aren't you leaving the door open for a possible IRS look see in 3, 5, 10 years?

Mike

[ruthc]

You're right!

I thought of how crazy my brain is working right now when I wrote that last reply.
Mactoolax is completed right on.....I completely forgot about the capital gain not being carried forward to another sale. Sorry for being so wrong in this. And I've done taxes for long. There is no excuse except to say I guess I had a "brain f___"!