I'm the beneficiary of an inherited home, which was sold from within the estate. I received a schedule K-1 from the sale of the home. Since I lived in the home as my primary home since before my relative died, I believe that I qualify for a partial exclusion of the capital gains from the time of my relative's death (16 months). But I am unclear on where to enter the exclusion on my individual taxes. Should I have my K-1 revised to include the exclusion? Or should I add the exclusion to form 8949 within the same line as my K-1 entry?
Normally, form 8949 has the long-term capital gain from schedule K-1 entered in column (h), with all other columns blank. And normally a home sale which qualifies for the exclusion has "H" entered in column (f), the exclusion amount entered in column (g), and all other columns appropriately filled (like purchase date and cost basis, etc.). I don't want to do this wrong, but I think adding the written line "From Schedule K-1 (Form 1041)" to my home sale entry on form 8949 would be appropriate and clear. I'd love some guidance from someone who knows for sure. Thank you.
[Later edit. When I say "Partial Exclusion" I am referring to publication 523 (2021) from the IRS which allows in particular circumstances one who has owned a home to exclude a fraction of the normal $250K amount based on the duration of time the home was owned and lived in as the primary home. In my case, this was 16 months, so I think I could exclude 16 / 24 * $250K = $166.67K.
https://www.irs.gov/publications/p523#en_US_2021_publink100073096
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