Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Capital Gain or Loss

Reporting Gain from the Sale of a Home

Reporting Gain from the Sale of a Home

Taxpayer Interview and Tax Law Application

Jeremy and Janice Smith sold a home last year, so the volunteer asks for details. Click here to view the intake and interview sheet.

Sample Interview
Volunteer Says…   Jeremy Responds…
 
Did you sell a home during this tax year? Yes, I was going to mention that to you because I should get a tax break on that.
 
Well, you may be able to exclude all or part of your gain from that sale, but to find out, I have to ask you a few questions. First, how long did you own the home? Three and a half years.
 
And was it the main place you lived for at least two years of that time? Yes, we lived there the whole time.
 
Great, you meet the ownership and use tests. During the two years before you sold the house did you claim an exclusion on a gain from another house? No, this is my only house.
 
Did you receive Form 1099-S? No, but I do have my paperwork from the sale. My real estate broker said I wouldn't need that form because I was within the limits.
 
Your paperwork shows a selling price of $360,000. Do you have anything that lists the basis in the home, that is, the value of the home at the time you bought it? Yes, I bought it for $280,000 and put in $20,000 of improvements—mostly new bathrooms.
 
With a basis of $300,000, your gain from the sale is $60,000. As a married couple who meets the ownership and use tests, you can exclude up to $500,000 from the sale, so you don't have to report the sale on your return.  
 
Indicate Jeremy's responses to these questions on the intake and interview sheet.