gain excluded on sale of personal residence in prior year, this year sells another PR

[nwtaxlady]

My client had purchased a house, Personal Residence in 2013 and sold it in 2014 with a gain of like $10,000. Gain was excluded due to unforeseen circumstances (took a job as VP and had to move to another State to be at their headquarters). Once moved he and wife bought another house in new state in 2014. Then in 2015 they got divorced and sell the house and both end up moving to other States.

This house sold in 2015 sold at a loss of about $18,000 and they each got a 1099-S. So his half of the loss would be about $9,000.
Since they sold a house within the last 2 years and excluded the gain, what happens now? This one is a loss so I am a bit confused on what happens in this scenario.

Please help!
Thanks

[rtsietsema]

No loss allowed

Without quoting resources, quick memory recalls the loss on a personal residence can not be a deduction on a tax return. Period. So what happened earlier would have no bearing.

That being said, I would assume that all worksheets for the exclusion on the gain of the earlier sale were completed. Since the two year use could not have been met, it is possible that only a portion of the gain could be excluded. That assumes the move met the requirements for the exception to the two year usage rule.

[TaxGuyBill]

There is not a gain, so you can ignore the 2-out-of-5-year exclusion.

It is a non-deductible personal loss. You can enter all of the sales information on Form 8949 (or however your software has you enter it), but there will be code "L" will be in column "f", and an "adjustment" in column "g" to zero out the gain/loss. See page 7 of the instructions for Form 8949, for information about Code L.

https://www.irs.gov/pub/irs-pdf/i8949.pdf#page=7

[taxea]

make sure you used the correct figures (allocated exclusion based on time owned and occupied). If this still creates a loss, no problem. The loss is not deductible.

[susie58gemini]

Gain or Loss on Personal Resdience

Please review the sale of the first home. There is perhaps a capital gain exclusion for the sale of a home if it is directly related to a move associated with employment. In regards to the sale of the 2nd home; it is correct that personal losses are not deductible UNLESS they are assets used in a business.

[kathyc2]

My client had purchased a house, Personal Residence in 2013 and sold it in 2014 with a gain of like $10,000. Gain was excluded due to unforeseen circumstances (took a job as VP and had to move to another State to be at their headquarters). Once moved he and wife bought another house in new state in 2014. Then in 2015 they got divorced and sell the house and both end up moving to other States.

This house sold in 2015 sold at a loss of about $18,000 and they each got a 1099-S. So his half of the loss would be about $9,000.
Since they sold a house within the last 2 years and excluded the gain, what happens now? This one is a loss so I am a bit confused on what happens in this scenario.

Please help!
Thanks

At sale they would have been asked if they lived there for the exclusion time. Since they didn't the title company would be required to issue 1099S, not knowing if gain or loss. Since the form was issued, it needs to be reported. Bill explains how to report it.

[Snaggletooth]

Gain is deferred?

Is the gain on the first home totally exempted, or is the gain deferred? If the gain is "deferred" there might not be a loss on the sale of the second home.