Reporting the Sale(p112)

Do not report the 2011 sale of your main home on your tax return unless:

• You have a gain and do not qualify to exclude all of it,
• You have a gain and choose not to exclude it, or
• You received Form 1099-S.

If any of these conditions apply, report the entire gain or loss on Form 8949. For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040).

If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797.

Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. These sales are called "installment sales." If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. You may be able to report the part of the gain you cannot exclude on the installment basis.

Use Form 6252, Installment Sale Income, to report the sale. Enter your exclusion on line 15 of Form 6252.

If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. You must separately report as interest income the interest you receive as part of each payment. If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). The buyer must give you his or her SSN, and you must give the buyer your SSN. Failure to meet these requirements may result in a $50 penalty for each failure. If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1.

For more information on installment sales, see Publication 537, Installment Sales.