I beleive Escrow is legally required to issue and report at closing all the dispursements they make (1099's) to the IRS and the state the property is located in, not the seller. Basically, the seller reports on their tax return their prorated share of the rental sale proceeds they received at closing and on the 1099 they received from escrow. Then you need to know the rest like the prorated selling costs and capital improvements over the course of ownership. I'm assuming you reported the rental royalties in prior years or it wouldn't be a rental. So when you import and go to update that section of your return for the current tax year as long as you are using the Turbo Tax assistant the tax program will walk you through the sale process asking you all the required questions which winds up on form 4797 (captures and calulates the gain including depreciation recapture on what you have taken previously) and then Schedule D (Capital gains) . The main part is you need to know your % to claim on everything allowable. If you both or maybe just one lived in it 2 out of 5 years prior to the sale which it will ask then one or both may have no capital gains up to 250,000, that's not a normal scenario but might apply and provide some tax relief who knows. It's important to familiarize yourself with all the rules on capital gains both federally and the state the property is in to insure you take every credit you have coming to you based on your individual circumstances. If you find this way to complicated, then seeking a tax professional maybe the way to go.
