if you rented the property at fair rental you were supposed to take depreciation. that reduces your basis and is not eligible for the HSE, so your taxable gain - sec 1250 recapture will be equal to the depreciation you should have taken. if you did not take depreciation run to a tax pro because the tax laws provide that you must recapture the depreciation you would have been allowed to take even in you never actually took it. Your pro-rata HSE will be more than the $55K so only the depreciation recapture, if any, would be taxable.
593 info
https://www.bing.com/videos/riverview/relatedvideo?q=593+tax+withholding+form&mid=4B780B042E5D0BD21B...
