Sale of Former Residence

[MontanaEA]

I guess today is my day to be terminally stupid. (Alright, it's not the first time!) I am just getting more and more confused trying to enter a sale of a rental condo that was the spouse's personal residence for 2 out of the last 5 years. She started renting it when she got married in 2005, sold it in 2006. I've got it on the rental depreciation schedule. Assets are:

Points being amortized

Long-term 1250 property ( the condo)

Short-term 1250 propoerty ( improvements to the condo)

Short-term 1245 property (appliances and carpet)

I overrode the current year amortization to write off the rest of the points, as the loan was paid off when the sale happened.

Then I set up three bulk sales so that the short-term gains and unrecaptured 1250 gain would show up on the 4797.

Then I input the Sch D Sale of Residence schedule.

In other sales of residence I've done this year, I didn't have it on a Sch E depr. sch. On those sales, the gain was reported on Sch D, then subtracted as a Section 121 adjustment to zero out the Sch D gain. On this one, it's just plain not showing up on the Sch D, but the whole gain is being reported on Form 4797. No 121 exclusion is being used. How do I make all this show up correctly on the tax return?

[jainen]

>>It's just plain not showing up on the Sch D<<

Don't use Schedule D that way if the property was being rented at the time of sale. I'm not sure what you mean by "bulk sales," but report your assets sold on Form 4797 in the normal way. Calculate the Section 121 exclusion manually and enter it as a negative number on Line 2. Depreciation can't be excluded so don't alter the amounts in Section III. That's all you need.

This is the way it is explained in Pub 523 and the instructions to Form 4797.

[MontanaEA]

Thank you, Jainen.