Here is my situation
Bought a home in Texas in April 2015, Lived there till Aug 2016, after which put it up as a rental. I moved states due to job related relocation. Sold it in April 2019.
So my understanding of the situation is that I lived 1yr 4 months in this home of the last 5 years prior to sale and also had to move out due to job-relocation. Hence prorating the upto 500k gains I was ignore, I should be able to ignore up to 16 months/24 months x 500k = 333k in gains. Now I am nowhere close to making that money on the sale - I am no where close to making that kind of money - the home only sold for 280k. So my reading is that I can ignore the whole sales gain, even adding depreciation etc.
However, how do I do this transaction overall is not clear to me. Should I treat this as my main home for sale - I am in a home now in CA since I moved from TX. Please advise.
While someone is reading my question above, here is the other thing..
I actually had a loss on the home from sale.. So the building was sold for 240k - selling expenses of 30k = $210k and it was bought at $235k, but also went through 20k in depreciation, net $215k. So loss of 5k.
My question then is in form 4797 Part III, Line 24 (Total Gain), should I put -5k or 0? It is not clear how losses should be handled.. Please advise.
Hoping someone is still reading my thread here..
So if the building sale was at a loss as I described above, should it be just in 4797 Part I and NOT Part III? Part III talks about "Gains" and so I am wondering of it is meant for that exactly and for losses we put them in Part I.
Can Line 24 in Part III be negative, I guess that is my ultimate question. Thanks!
Quite a confusing set of posts. I actually learned something in trying to reply to your post regarding "prorated home selling exclusion", first thought no way - but decided to check, here is a very good explaination: https://www.nolo.com/legal-encyclopedia/the-partial-home-sale-tax-exclusion-irs-approved-unforeseen-...
Good news is it appears to me that you qualify (and not sure it is important) but as we go thru this maybe I will change my mind. You have failed to provide the most important piece of information - the purchase price! So, here is how it works - take the purchase price, reduce it by the depreciation you took while it was a rental property, subtract that from the selling price and you get what? A gain? Than you reduce that by the credit but only to zero! You cannot use the credit for anything other than gain and if you had no gain, then the credit is not part of the calculation. Once again - you do not get to use the credit to create a loss - only tp zero out any gain. Hope this helped!
Thank you for taking the time to respond.
My essential question now is if after calculating the sell-buy value (including basis, selling exp) etc. it turns out to be negative - so it is a loss then does it go to 4797 Part III at all? That part is all about Gain so I think No. I was using taxact and in there strangely Line 24 is put as a negative # in 4797. That was throwing me off. If Part III is all about gain, how is it accepting a negative #.
Maybe it is in Part I that it goes. I have to separate out the building and the land in 4797 Part I, so I now think there would be 2 line items in Part I there for each. And then it flows to Schedule 1 to 1040.
I think 4797 is in play since it is a rental home that I sold. Please chime in.