Rental Sold

[Tracy Lee]

TP sold a home that was a primary home from 2003 to 2014, then married and moved in with (now deceased) husband into his home and let her kids live in it from 2015 to 2020. She then turned it into a rental from 2020 until in sold in 2022 at a substantial gain. Is there any way I can reduce that gain because it was a primary home for 11 years?  If so, where would I acknowledge that? Right now it is being reported as a bulk sale on the Schedule E fixed assets form and flowing to a 4797.

[Max W]

Did the husband put her on title and if so when?

[RitaB]

15 hours ago, Tracy Lee said:

TP sold a home that was a primary home from 2003 to 2014, then married and moved in with (now deceased) husband into his home and let her kids live in it from 2015 to 2020. She then turned it into a rental from 2020 until in sold in 2022 at a substantial gain. Is there any way I can reduce that gain because it was a primary home for 11 years?  If so, where would I acknowledge that? Right now it is being reported as a bulk sale on the Schedule E fixed assets form and flowing to a 4797.

She did not live in the home two of the past five years.  It is reported on 4797, correct.  

[Sara EA]

No Section 121 exclusion because she doesn't meet the 2 out of 5 year rule.  Her basis is what she paid for the home plus major improvements minus depreciation.  Yes, it goes on the 4797.

I don't understand the desire to lower her gain.  She made money from the investment and has to pay a fraction of it in taxes.  That still leaves her with plenty left.  When any of my clients tell me they are going to sell a rental property, I ask them to give me the sales paperwork when they do so I can tell them how much to put aside for taxes.  That way there are no surprises and they expect the tax bill.

[Randall]

I had a client sell a rental home this past year.  Normally not a problem.  He was a year from going on Medicare and was getting a big advance credit on the health insurance exchange.  With the gain, his income went way up and he had to pay back the credit.  Ouch. 

[DANRVAN]

On 8/21/2023 at 3:34 PM, Tracy Lee said:

then married and moved in with (now deceased) husband into his home

Sounds like there was a possibility this was separate instead of marital property for husband's estate, with full step up in basis.

[jklcpa]

I read the original post as the home that taxpayer owned and later rented was owned solely by the taxpayer. She has children and may or may not have had a step-up in the past from a deceased spouse, or she could never have married, or married and divorced. I think that is the property now being sold that the kids were living in until 2020 that was then turned into the rental.

The original post makes no mention of that or a previous spouse related to the home/rental being sold.  Taxpayer moved out of property being sold in 2014 and then married the now-deceased husband and moved into his home.  To me, it sounds like she may still be living in the home of the now-deceased husband.

On 8/21/2023 at 6:34 PM, Tracy Lee said:

TP sold a home that was a primary home from 2003 to 2014, then married and moved in with (now deceased) husband into his home

 

[DANRVAN]

19 hours ago, jklcpa said:

I read the original post as the home that taxpayer owned and later rented was owned solely by the taxpayer.

 

On 8/21/2023 at 3:34 PM, Tracy Lee said:

, then married and moved in with (now deceased) husband into his home and let her kids live in it from 2015 to 2020. She then turned it into a rental from 2020 until in sold in 2022 at a substantial gain.

The wording is not clear, but after reading it again it appears you are correct Judy.