How do I report carry forward cost basis gains from prior years home sales on a home sold in 2018?

[Opus 17]

When did you sell your previous home? It would have to be a very old carryforward to worry about it.

[gdshepardsr]

Here is my full question that had too many characters to fit in the allocated space for questions: I sold three jointly owned personal residences prior to 1979 in which the gains were allowed to be deferred as a cost basis adjustment and I need to know how to deal with that issue on a personal residence jointly owned by my wife and I in 2018.  Turbo Tax does not seem to address this issue and I can’t find where IRS Pub 523 does either.

[Opus 17]

Well, what you do is reduce your cost basis in the property that you are selling now by the amount of the deferral.   Assuming this is your primary home and you meet the other tests, you can still exclude up to $500,000 of gain if married filing jointly, with the gain calculated from the adjusted cost basis.  I will try to find where that is written down for you.

[TaxGuyBill]

As Opus said, that just lowers your Basis.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p551#en_US_201812_publink1000256956">https://www.irs.gov/publicatio...>

You don't need to specifically report the deferred amount separately, just report your Basis.

[gdshepardsr]

Thanks, I have calculated the accumulated gain from the sale of the three previous sales plus the gain from the 2018 residential sale and it is significantly below the $500k exemption for jointly owned home sales.  I just don't know how to report it correctly on the 2018 return.  I will await your findings.

[gdshepardsr]

Thanks to Opus and TaxGuyBill for the Pub 551 backup and quick response.

[Opus 17 · Accepted solution]

If you did not get a 1099-S form at the closing, and you know your gain is less than the exclusion, you don't even have to report the sale.

If you want to check it in Turbotax, use the "sale of home" interview in the Other Income section.  You are first asked for selling price and selling expenses.  You are then asked for your cost basis; click the "Easy Guide" icon.  This will give you a detailed interview on adjustments to cost basis (improvements, closing costs, etc.)  One of the questions is "did you ever sell a home before this?"  If you say yes, you get taken to a screen to add your prior rollover information.  (Also a note that it only applies to gain postponed from a home sold before 1997.)  See pic.

[gdshepardsr]

Very Interesting!  I worked through the Step-by-Step to see what you described and entered the deferred  accumulated gain of all the old sales and the result was the same total gain on sale as when I adjusted the cost basis so either way gets the same results.  The advantage to the method you mentioned is that it provides some sort of an explanation for such a low cost basis.  I could see IRS wanting an explanation.  I did receive a 1099-S (which includes only the date of sale, gross proceeds, property location, name of seller and tax ID) so the sale does have to get reported.  The gain seems to get excluded in either case. Wouldn't the sale still reported in either case even though the gain is excluded?  

[Opus 17]

I don't quite understand your question.  If a taxpayer qualifies for the exclusion, and the gain is less than the exclusion, and they didn't get a 1099-S, reporting is optional.  If the taxpayer gets a 1099-S, reporting is required even if it ends up non-taxable.

[gdshepardsr]

When you said “reporting is optional” it cleared up my misunderstanding and answered my question.  Thanks so much to all who helped me with this.  I feel very comfortable with all the information you have provided!