@curiousminds --
Q: "How do folks properly file their taxes to reflect this reality?"
A: Assuming the seller does not qualify for the capital gain exclusion and therefore must report the sale, in TurboTax the user would go to Personal Income > Less Common Income > Sale of Home (gain or loss), and follow the program prompts. This will result in the sale being properly reported on the user's tax return..
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
