My customers owned a home for years and in Nov 2012 bought another home, moved and rented the original home. In Aug 2015 they sold the original home. If I understand it correctly they can exclude gain on the sale because they did live in this home for 2 out of the last 5 years. Is there a form I need to fill out to handle this? Also I know I need to recapture the depreciation claimed during the time the house was rented. Just not sure which line on the 4797 to report this on. Any help appreciated.
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There is no special form to use, but it is just entered on 4797.
Does this link help?
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Schedule D not 4797
In Pro Series you fill out the Sale of a Home worksheet and the depreciation which is to be taxed flows to Schedule D. 4797 would only come into play if they did not meet the ownership and use tests.Comment
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Form 4797 can certainly be used if they meet the ownership and use tests (see my link above).Originally posted by Kram BergGold View Post
However, depending on how you want to categorize a rental property, Schedule D could be appropriate (see following link).
Personally, if your program does not have a worksheet that automatically does it, Form 4797 seems more appropriate to me. Any other rental sale would be reported on 4797, and the instructions specifically set forth instructions for the situation for how to use the §121 exclusion on Form 4797 (from the link in my first reply).Comment
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If you read the IRS's own instructions for the two forms ... i.e. F-8949 and F-4797 ... it isn't especially clear. Both say the sale of a residence, including the §121 exclusion, can be reported on that form. Pub 523, however, does make it clear that if all the gain is capital gain except for the depreciation "recapture" due to rental use, then the transaction should be reported on F-8949.
Having said that, I will ask, rhetorically: "What difference does it make?"Roland Slugg
"I do what I can."Comment
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