Do I include proceeds from home sale after May, 1997 in cost basis?

[eliot]

Hello. I am determining the cost basis for the sale of our home in 2019, for which there is a capital gain. TurboTax asks for us to include proceeds from sale of previous home. We sold a home in July, 1997, for which there is a Form 2119. However, my understanding is that any sale subsequent to May, 1997 is not to be included in the current cost basis calculation. Do I dismiss this July, 1997 gain, or must I include it in the current costs basis calculation? Thanks. 

[AmeliesUncle]

The deferred gain from Form 2119 does decrease your Basis.

Most sales after May 6th, 1997 used the exclusion so that would not affect the Basis of your new home.  For for some reason, you elected to use the old rules so that does affect Basis.

[eliot]

Thanks. Upon reviewing the 2119, we had actually sold the house on 9/1/1997. According to the IRS Rules 523 for 1997 (attached below), using the "old" (Chapter 3) rules was not allowed unless the home sale occurred prior to 8/6/1997. So, wouldn't the generation of the 2119 be in error?

Further, the accountant did not include any costs incurred for the property in determining the gain on sale (which would have eliminated the profit). If the 2119 must still be reported, then could these costs now be used as part of the overall cost basis? 

[eliot]

IRS Rule 523: https://www.irs.gov/pub/irs-prior/p523--1997.pdf

[AmeliesUncle]

If you had a binding contract prior to the cutoff date it could still be used. 

Yes, use your ACTUAL Basis, even if the Form 2119 did not show it.