Case Study 2: Reporting Gain from the Sale of a Home
Jeremy and Janice Smith sold a home last year, so the volunteer asks for details. Click here to view the intake and interview sheet.
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Jeremy Responds… |
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| Did you sell a home during this tax year? |
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Yes, I was going to mention that to you because I should get a tax break on that. |
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| Well, you may be able to exclude all or part of your gain from that sale, but to find out, I have to ask you a few questions. First, how long did you own the home? |
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Three and a half years. |
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| And was it the main place you lived for at least two years of that time? |
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Yes, we lived there the whole time. |
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| Great, you meet the ownership and use tests. During the two years before you sold the house did you claim an exclusion on a gain from another house? |
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No, this is my only house. |
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| Did you receive Form 1099-S? |
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No, but I do have my paperwork from the sale. My real estate broker said I wouldn't need that form because I was within the limits. |
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| Your paperwork shows a selling price of $360,000. Do you have anything that lists the basis in the home, that is, the cost of the home at the time you bought it? |
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Yes, I bought it for $280,000 and put in $20,000 of improvements—mostly new bathrooms. |
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| With a basis of $300,000, your gain from the sale is $60,000. As a married couple who meets the ownership and use tests, you can exclude up to $500,000 from the sale, so you don't have to report the sale on your return. |
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| Indicate Jeremy's responses to these questions on the intake and interview sheet. |
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