OK, that makes it easy. Because the house was “in service” less than one year, you do not have to take depreciation or account for recapture when you sell. You will also qualify for the capital gains exclusion, under the facts you stated.
Since you did not receive a 1099–S form, you do not have to report the sale on your tax return. If you report the sale in TurboTax, use the section for “sale of your home“ as indicated above, and not the section for sale of rental property. After you enter all your information, TurboTax will probably tell you “you do not have to report this sale unless you received a 1099-S form. Do you want to report it anyway?“ and you can say “no” and it will be left off of your tax return again.
Because you do not have any taxable capital gains, you don’t receive any tax benefit for the repair expense as an adjustment to the sale price. However, as I indicated previously, I don’t believe that you would be allowed to deduct the repair expense against your rental income because you did not actually pay for the repair. You gave the seller a credit on the selling price, and you have no idea whether the seller paid more or less to repair the items or has left them un-repaired. Sellers who have to make repairs to sell their personal homes almost never get a tax benefit for it anyway, so you are not in any worse position than any other home seller.
Cheers.
