This is an excellent writeup Carl, thank you for all the details in your attached document
My case is a slight variant :
- House burned down completely, in a federal declared disaster
- I was living in the house for 8 yrs before (primary home) but had converted the home to a rental just 1 year before fire.
- Adjusted basis is less than the total insurance payout, hence involuntary gain
- From Section 121 exclusion rules, since i lived in the house for 2 of last 5 yrs, I should be eligible to qualify for capital gains exclusion
Questions :
Based on your document, if i enter the details in TurboTax it shows that I have to pay a large tax bill on the gain. ( based on 4684 and 4797)
How do I document this sale in Turbo Tax, to avoid paying the taxes on involuntary gain.
Thanks in advance.
