Important Terms

Once you have determined that a taxpayer is eligible for the exclusion, to figure the gain or loss on the sale of a taxpayer's main home, you must know the following about the home:

• Selling price
• Amount realized
• Basis
• Adjusted basis

Recall that taxpayers who have a gain from the sale of their main home may exclude up to $250,000 of the gain from their taxable income ($500,000 if Married Filing Jointly), if all conditions are met.