Sold home without any gains on home sale in 2022?

[davej]

  Turbo tax 2022 tells me two different things on if it is an installment sale or just seller finance interest. 

I am confused.  There are 2 places in Turbo Tax home and business that each are not quite right.  Below is the exact situation.

Wife and I sold our home in 2022 for 360K and carried a 180 K deed of trust for 7 years.

There was zero gain and we should be clear with the 500K exemption and just pay tax on the interest for the loan yearly.

I bought turbo tax early and maybe it is not updated?  Please advise!  Thank-you !

[Anonymous_]

The program is not yet complete and finalized, in terms of its components.

However, did you have any gain on the sale or simply gain that is covered by the home sale exclusion?

[davej]

No gain on the sale.  Why please?

  It was an Offgrid home that are  often hard to sell. Not a great investment but it was fun until the wildfires got bad.

[Anonymous_]

You stated that you sold the home for $360k but did not mention a cost basis (purchase price).

[Critter-3]

Ok ... you do not need to enter the sale at all since this was a personal residence  UNLESS you got a 1099-S at closing.  In that case you only need to report the interest earned from the installment sale.  

[davej]

There was no cost basis as we spent 360K to build it and sold it for the same amount. 

This is what is causing my issue with Turbo Tax. One place TT says it is an installment sale and wants the basis.

The other place in TT says it is seller financed interest but does not like that interest is paid over 7 years.

I appreciate your interest and hope to help others with this, down the road.

[davej]

No 1099-S at closing BTW.

[Mike9241]

I believe the issue is your trying to report on an installment basis when you don't have a gain. this is not allowed. so report the full amount of principal in the year of sale and use the 1099-INT to report the buyer's finance interest.

[Anonymous_]

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@davej wrote:

There was no cost basis as we spent 360K to build it and sold it for the same amount. 

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Then $360k is your cost basis and you have no gain since you sold the property for the same amount.

@Critter-3 and @Mike9241 are directly on target; report the sale as a wash (i.e., no gain) and report the interest on the note.

[davej]

I will try it and see what TT does later this am. I will get back.  THX !

[Hal_Al · Accepted solution]

Your problem is that you are entering a complicated sale, when you don't need to, and expecting too much from Turbotax (TT), without full input from you.

You have two choices: 1. Don't enter the sale, in TurboTax (no gain, no 1099-S, sale of primary home) or 2. Enter with $360K as both your sale amount and cost basis. If you then tell TTthat it was an installment sale, you need to select the option to report the gain on the cureent year return. 

Enter the interest at the 1099-INT screen, even if you didn't actually get a 1099-INT. 

[Anonymous_ · Accepted solution]

@Hal_Al is also correct and if you try to enter the transaction as an installment sale in TurboTax without a gain, the program will delete the entry.

Enter the interest you received for 2022 in the section shown below.

[davej]

I am going to use both of your advice to me here.

I will pick Hal Al choice number one and not report the sale of the home as it is a wash or slight loss.

I will report the seller finance interest each year.

Thank-you both and everyone else.

I have the name & address of the person paying me interest,

Do you think I need the SS # of the buyer?

[davej]

Below is what TT says when asked if you sold your home in 2022? It then says click here to see if you have to report the sale. I posted this for others and not the people who helped me above!  Cheers!  Dave

When to report the sale of your main home

The tax code allows taxpayers to exclude up to $250,000 ($500,000 for certain taxpayers who file a joint return) of the gain from the sale (or exchange) of property owned and used as a principal residence (main home) for at least two of the five years before the sale. If a taxpayer qualifies to exclude the entire gain on the sale form income, the transaction might not be required to be reported on the tax return.

To claim the exclusion, you must meet the ownership, use, and timing tests.

Ownership: You must have owned the home for at least two years during the five years prior to the sale of your sale. It does not have to be continuous.

Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale. This means that during the 5-year period ending on the date of the sale, you must have, owned and occupied the principal residence for at least two years.

Timing: You cannot have excluded the gain on the sale of another home within two years prior to the sale.

If you have any of the following situations you need to report your home sale:
- If you used your main home for any other reason such as for business or rental purposes
- If you excluded the gain from the sale of another home during the two-year period prior to the sale of your home
- You have a gain and choose not to exclude it
- You have a gain and you do not qualify to exclude all of it
- You received a 1099-S for the sale
- You acquired the property through a like-kind exchange
- You are subject to expatriate tax
- Other examples for when you need to report your home sale can be found here IRS Publication 523, Selling Your Home

If you have determined that you do not have to report your home sale please select "No" on the screen.

If you need to report your home sale or are unsure select "Yes" and TurboTax will help you figure it out

[Critter-3]

@davej 

1) you did not get a 1099-S so you do NOT need to enter the sale at all anywhere in the program since the entire sale is excluded or a loss due to the costs of sale

2) do NOT use the installment sale section even though you did an installment sale

3) ONLY report the interest in the interest section as seller financing ... you will need to enter the buyer's name, address & SS#  on your Sch B  and they will need to do the same on their Sch A.