sale-1/2 residence, 1/2 rental

[sdiazea]

I think I have a dilema & need help.
Taxpayer bought home in 98.
Rented out 1/2 of it from 2002 - 2005, at which time she got married, moved out & rented the whole house from 8/2005 - 5/2007 (less than 2 years).
5/2007 she sold the house.
So, she had lived in it from 1998 - 2005. That satisfies the 3 out of the last 5 rule. But, because it was a rental for 2 of the last 5 does that change things? Regarding the gain on the house & there is gain, can it be split down the middle - personal & rental?

Thanks, Sharon

[veritas]

Good news

Look at page 6-22 in TTB.

By the way the test for the exclusion is 2 out of the last 5 years prior to the sale.

[sdiazea]

That is Good News

Thank You Veritas:
I knew the exclusion rule - I was just emphasizing that the exclusion was more than met.
However, am I understanding what I am reading? That depreciation taken does not get reported either???
The gain on the sale was about $120,000 - so there is no taxable gain, even from depreciation??

[veritas]

The depreciation

is not excluded, therefore it is taxable.

[sdiazea]

Taxable depreciation

Thanks a bunch Veritas - Your guidance put me on the right path. Reporting the basis & selling price in the disposition area of asset entry it flowed to Sch D as it should. My software, ATX did the work & entered Section 121 Exclusion and the gain amount on the line directly beneath it.
My next question: The accumulated depreciation amount flows to line 19 - Section 1250 - Net Unrecaptured Gain. Is this correct?

Sharon