TP sold house that was going to be their primary residence before the 2 years, how do I report?

[giogis245]

It's been a long week (and it's only Tuesday) and I cannot think straight.  TP bought house 3/6/20 and sold it 11/15/21, do I have to report on 8949 and pay taxes on the proceeds? He bought a piece of land and thinks they can write off that purchase, which I have told them they have not as they plan to build a new house. Can you please shed some light.

[Lion EA]

At least it's long-term capital gain. Is their income low enough that they could be in the 0% CG bracket? Otherwise, any chance for an unforeseen circumstance?

An expensive lesson to call you BEFORE making any large financial moves.

[RitaB]

Just to clarify, they don't pay tax on the proceeds, but on any gain, and yes, report the sale on Form 8949.  Correct, you can't reduce the gain by the other property he bought.  They all think that; find an article or two that addresses that and print for him.

[Lee B]

The reinvestment in a new home strategy died with The Taxpayer Relief Act of 1997.

[Pacun]

A key question to ask the question is: "Why did you sell the property?" Depending on the answer, you could use the exclusion partially or make the profit fully taxable depending on their income.

[TexTaxToo]

Unforseeable event:  "The value of the house jumped 30% and we could make a killing!"

See Pub. 523 page 6 for the actual allowed "unforseeable events" - having twins is one!!

[ILLMAS]

Was the home being improved and was vacant or was it rented until it was sold?

[mcb39]

In today's market, the profit could be huge.  I know that I have one of these coming up in a return so I am following this conversation closely.