Help on New Mexico Return

[WhiteOleander]

Have a client that sold a residence in New Mexico. I can't find it written that NM goes along with the same rules for the gain exclusion as per Federal rules.

Also, since there is no gain or loss on the Federal Sch D, the sale does not appear anywhere on the NM return.

It wil be filed Elec. Will the NM DOR "see" the federal Sch D and recognize it on the NM?

[Brad Imsdahl]

According to TTB All States Edition, page NM-2, New Mexico starts with Federal AGI and then adds and subtracts certain items for the differences between federal and state rules. There is no addition in the list of additions on page NM-3 for the sale of a residence. Therefore, you can assume NM goes along with the federal rule for excluding gain on the sale of a residence.

[Snaggletooth]

TaxPayer's Residence

Oleander, if your concern is the federal "D" being seen by New Mexico, this raises a question.

Are you sure this was the taxpayer's principal residence? If so, there generally shouldn't be a federal "D" because the sale would not be reportable.

Has your customer moved from New Mexico in 2006? If so, there is most likely a requirement for him(her) to file as a "Part-Year Resident." This would require a division of income into a NM portion and an "All Other" portion to determine how to allocate the tax.

If the sale of the New Mexico property was taxable for federal purposes, it should be ascribed to NM on the allocation formula.

As Brad has stated, the entire federal income will be taxed for New Mexico for purposes of calculating the NM tax. Then the tax will be reduced by the allocation formula. This way NM gets the full benefit of the taxpayer's highest tax bracket before reducing the tax by the allocation formula.

[S T]

Sale of Residence

While it is true if there is no taxable gain beyond the exclusion amounts for sale of personal residence, I still always report on the Schedule D.

My software will allow me to do this with a box that says "print even if not required" Once again I like the paper trail.

Sandy

[WhiteOleander]

I also report the residence sale. Regardless of whether or not it is taxable or excluded.

Clients have received letters from IRS about the sale after the return is filed. So, then, I have to fix that. And sometimes the client thinks I'm incompetent.

So, until the IRS is better at matching up the residence sales in their computer, I report it.

[Snaggletooth]

Exception Noted

Thanks ladies. Perhaps reporting the sale of a residence may be a good idea, especially if there is a 1099-S. I might consider doing it also if I could figure out how to do it without a schedule D showing equal amounts for cost and selling price.

Is there any other way to do it? There used to be a Form 2119 where you could report the sale of a residence and it would be non-taxable, but they've discontinued it.

Thanks, Ron J.

[WhiteOleander]

In our program, you can code the sale. It will show up on one line as a gain. Then on the next line, it will print "Sec. 121 exclusion" and back the gain back out. So, it nets out as zero.

We can also code it if it is a loss to not allow the loss. "personal loss" is written in the space.

[Questionguy101]

In our program, you can code the sale. It will show up on one line as a gain. Then on the next line, it will print "Sec. 121 exclusion" and back the gain back out. So, it nets out as zero.

We can also code it if it is a loss to not allow the loss. "personal loss" is written in the space.

My program does the same thing too (print "personal loss" if the sale of home results in a loss). But then the program also refused to efile the tax return because there is a 'personal loss". Does anyone know why they don't let the tax return be efiled if there is a personal loss? I just can't explain it.

[S T]

Should be able

Do you have a function in your software to show the sales price less the cost basis and then report the exclusion up to that amount.

In my software when I enter the sale of personal residence it will show sales price to match to the 1099, the adjusted cost basis and expenses and show the gain on the transaction. Then the next line down on the Schedule D show the exclusion which would be limited to the amount of the gain.

So the resulting number is a -0-. (Should not show a loss) Should go through efile fine, I haven't had any problems and have been doing it this way for several years. Maybe contact your software techs.

Sandy