Proceeds from sale of primary residence

[Janitor Bob]

For the first time in probably 5 years, I have a client that sold their primary resience in 2012 and purchased another home. I am familiar with the concepts of the exclusion and I think I have all of the needed info....but since it has been so long since I have done one of these.....Do any of you have any words of wisdom/caution?

Client does have a 1099-S. It looks like thsis reported on Sch D via the 8949. Client meets all the tests to exclude maximum amount of gain. She built the home in 1970 for $30,000. Sold it in 2012 for $144,000. so based on this alone, she would have a gain of $114,000....and she can exclude up to $250,000.

Soooo...Is there any reason for her to go back and get the cost of any improvements she made that would have increased the basis? Her husband (who passed away 8 years ago) was always the record-keeper of such things and I know she will have no idea where to look for such expenses/improvements.

[OldJack]

Not really... she reports the gain and on the next line subtracts it off with comment citing Code Sec. 121. Exclusion of gain.

[Jack from Ohio]

Agree 100% with OldJack. Put it on Sched D. Total exclusion.

The old method of keeping track of all improvements is still what everyone remembers. Just like "I think we can just do short form this year."

[Janitor Bob]

Thanks to both of you...this is what I suspected, but like I said...it has been a long time since a client sold a principal residence.

[Pacun]

For the record, you should calculate FMF of the house at the time of death of her husband and increase the basis by half of the gain of the house.

So, 8 years ago (when the husband died and the market was good) the house might have reached the FMV of $144K. That means that the gain at that point was $114K (144K-30K). The basis the house was at that moment $30 plus half of the 114K which is $58K for a total basis of $88K.

In this case, it doesn't matter but if this were a rental property for the last 5 years, it could make a big difference in taxes.