Home sale exclusion on a sale to a related party

[apollog]

I want to sell my home to a S-Corp that I solely own and control. It will be a sale and not an exchange for the company stock.

Since it is a sale to a related party, the gain on the house is an ordinary income.

• Can I still get the house sale exclusion (I lived in it in the past 25 years as my main residence).
• If I get a 1099-S, it is usually need to be reported on form 8949. But in my case it is an ordinary income, IRS will look for it on the 8949 but it is an ordinary income and does not belong to Schedule D. So, where do I report it and how I claim the home sale exclusion?
• In reference to the 1099-S, the house will be sold for over $250K, so, I can not be excluded from getting 1099-S.
• I read somewhere that when the company sell the house to a third party (afre buying from a related party), the cost basis is my original cost basis. Is that true?

Thanks.

[M-MTax]

You can get that exclusion for the sale but you won't get it again in the future because the exclusion can only be taken by individuals and disregarded entities and S-CORPs don't qualify. With a personal main residence the excess over the exclusion amount is just capital gain. If you bought the house your basis is your cost plus any improvements you made.

[apollog]

It will be considered as an ordinary income because the sale is to a related person.

How do I report the exclusion?

[MarilynG1]

If your gain is less than the Exclusion Amount (250K Single, 500K Married) you don't have to report the sale on your tax return, unless you receive a 1099-S. 

Click this link for more info on How to Enter Form 1099-S.

[apollog]

Thanks, but the sale is for over $250k as I mentioned in my question.

[MarilynG1]

It doesn't matter if the sale is over 250K; is your gain over 250K?  This is the criteria for the exclusion, as I mentioned. 

Click this link for more info on the Home Sale Exclusion.. 

[apollog]

I meant the $250K limit in relation to be able to avoid getting a 1099-S

[DMarkM1]

Here is a link with some discussion on the 1099S.  Many times if the sale price exceeds the purchase price the closing agent will issue a 1099S and definitely if the sales "proceeds" exceed $250,000 since that is a requirement. 

Talk with your closing agent to get the answer for sure.

So it appears you should be getting a 1099S for proceeds over $250,000 and be reporting the sale on your tax return and be able to exclude $250,000 of gain ($500,000 if married and jointly owned).  

You will report the transaction and exclusion in the "Less Common Income" section using the "Sale of home" topic.

[apollog]

I didn't see "Less Common Income" section using the "Sale of home", I did see a question about 1099-S.

But the big concern is 26 U.S.C. § 1239. There is nothing in "Sale of home" about selling to a related party corporation of a property that will be depreciated by the buyer. And that will make the gain an ordinary income.

[DMarkM1 · Accepted solution]

Click on the "Wages & Income" tab. 

Scroll down to "Less Common Income" 

"Show More" 

Scroll down to "Sale of Home"

There is nothing in Publication 523 Sale of Home about that code because that code doesn't apply to a sale of main home.