Investors & landlords

Thanks @Mike9241 . May we walk through the below example I have? Questions are in blue:

HOUSE A: 

   Cost Basis: $100k 

+ Closing Costs: $5k 

+ Improvements:$5k

=Total Adjusted Cost Basis: $110k

Sale Price: $150k

-Closing Costs: $20k ( I'm using the Final Settlement Statement at the closing - is that right?)

=Net Proceeds: $130k

Total Capital Gains: $20k ($130k-$110k)

Does your home qualify for the Exclusion of gain? (Pub 523)?

(1) Eligibility Test 1 (Auto Disqual): ANSWER: None apply | RESULTS: PASS

(2) Eligibility Test 2 (Ownership): ANSWER: Yes- bought May 2017 sold Jan 2021 | RESULTS: PASS

(3) Eligibility Test 3 (Residence): ANSWER: Yes- lived in May 2017 sold Jan 2021 | RESULTS: PASS

(4) Eligibility Test 4 (Look-back): ANSWER: No-first house ever owned and sold | RESULTS: PASS

(5) Eligibility Test 5 (Exceptions): ANSWER: None apply | RESULTS: PASS

(6) Eligibility Test 6 (Final Determination): ANSWER: we passed 1-5 for max exclusion | RESULTS: PASS

Marital Status for 21 Tax Year: MFJ

Max Gain Exclusion for 21 Tax Year for MFJ:  first $500k of capital gains 

How much of the Total Capital Gains to be excluded:  100% ( $20k is under the $500k)

HOUSE B: 

   Cost Basis: $200k 

+ Closing Costs: $10k 

+ Improvements:$0k

=Total Adjusted Cost Basis: $210k

Sale Price : $350k 

-Closing Costs: $30k 

=Net Proceeds: $320k

Total Capital Gains: $110k ($320k-$210k)

Does your home qualify for the Exclusion of gain? (Pub 523)?

(1) Eligibility Test 1 (Auto Disqual): ANSWER: None apply | RESULTS: PASS

(2) Eligibility Test 2 (Ownership): ANSWER: No- bought Dec 2020 sold March 2022 | RESULTS: FAIL

(3) Eligibility Test 3 (Residence): ANSWER: No-lived in Dec 2020 sold March 2022 | RESULTS: FAIL

(4) Eligibility Test 4 (Look-back): ANSWER: UNKNOWN | RESULTS: TBD

        *** Q: should we defer the  House A exclusion to help with House B capital gains since they are so much higher???***

(5) Eligibility Test 5 (Exceptions): ANSWER: Yes- Divorce in Feb 2022  but didn't reside 2 yrs| RESULTS: FAIL-                   ***Q: will this allow me to have partial exclusion???***

(6) Eligibility Test 6 (Final Determination): ANSWER: we failed tests 2 & 3 for max exclusion | RESULTS: FAIL-need to determine if qualifies for partial exclusion

Does your home quality for a partial exclusion of gain?

(i) Work-related Move:  No 

(ii) Health-Related Move: No 

(iii) Unforeseeable Event: ANSWER: Yes- Divorce- occurred during time of ownership and residence 

(iv.) Other facts and circumstances: ANSWER: yes i can prove situation causing the sale arose during own and use time, yes i sold home not long after the situation rose, and yes i couldn't have reasonably anticipated this when bought home

Marital Status for 21 Tax Year: SINGLE 

Max Gain Exclusion for 21 Tax Year for Single:  first $250k of capital gains BUT we failed test 2 & 3 so we can't take max

   ***Q: How much can we take?? Is it the the lesser of the # of days between (1) House A sale Date and House B Sale date AND (B) House B Purchase Date and House B Sale Date?***

How much of the Total Capital Gains to be excluded:  61.7% ($154,452.05/$250k)

    ***Q: Do I look at Worksheet 1. Section B of Pub 523??***

                      Step 1. 1.: 469 days 

                      Step 1: 2. 469 days 

                      Step 1: 3. 451 days 

                      Step 2:  451 days /730 days = 0.617808

                      Step 3:  0.617808. x $250,000 = $154,452.05.  **Q: Does this mean we can exclude up to this??**

QUESTION 1: If I have $110k in capital gains in House B and the partial max I can do is $154k and $110k is less than $154k, will I still be taxed? OR is this saying that I still have to pay taxes on 39% (100%- 61%) of the $110k (i.e. $42k)

QUESTION 2: If we took 100% exclusion of House A in 2021, can we take another exclusion for House B in 2022 due to the unforeseeable circumstance-divorce? 

QUESTION 3: If we agree to pay taxes in 2021 on House A 2021gains how does that impact our House B 2022 gains (i.e. does it allow us to lower our House B 2022 capital gains amount thus lowering how much we pay taxes?)

QUESTION 4: Do any of the following closing costs count towards adjusting cost basis (i.e. increase it):

      4a.- loan charges- tax service fee 

      4b.-recording fees

      4c.-city transfer stamps 

      4d.-tax payment fee to title company and transfers

       4e.- stamp fees 

       4f.- loan origination fee- underwriting/processing 

      4g.- loan origination fee- tax service fee 

QUESTION 5: Do any of the following closing costs count towards adjusting gross proceeds (i.e. lowering it):

      5a.- county taxes

      5b.-title related fees 

      5c.-county transfer tax

      5d.-city transfer tax

       5e.- state transfer tax to title company

     5f.- municipal fees to city 

QUESTION 6: I should be using the Final Settlement State to retrieve my closing cost for purchase and sale adjustments as opposed to the Closing Details Worksheet correct?