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Current Year Tax Map
Publication 523
taxmap/pubs/p523-001.htm#en_us_publink1000200623

Figuring Gain or Loss(p4)

rule
To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Subtract the adjusted basis from the amount realized to get your gain or loss.
  Selling price 
 Selling expenses 
  Amount realized 
 Adjusted basis 
  Gain or loss 
taxmap/pubs/p523-001.htm#en_us_publink1000254553

Gain.(p4)

rule
Gain is the excess of the amount realized over the adjusted basis of the property.
taxmap/pubs/p523-001.htm#en_us_publink1000254554

Loss.(p4)

rule
Loss is the excess of the adjusted basis over the amount realized for the property.
taxmap/pubs/p523-001.htm#en_us_publink1000200625

Selling Price(p4)

rule
The selling price is the total amount you receive for your home. It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale.
taxmap/pubs/p523-001.htm#en_us_publink1000200626

Personal property.(p4)

rule
The selling price of your home does not include amounts you received for personal property sold with your home. Personal property is property that is not a permanent part of the home. Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Any gains from sales of personal property must be included in your income, but not as part of the sale of your home.
taxmap/pubs/p523-001.htm#en_us_publink1000200627

Payment by employer.(p4)

rule
You may have to sell your home because of a job transfer. If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8.
taxmap/pubs/p523-001.htm#en_us_publink1000200628

Option to buy.(p4)

rule
If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Report this amount on Form 1040, line 21, or on Form 1040NR, line 21.
taxmap/pubs/p523-001.htm#en_us_publink1000200629

Form 1099-S.(p4)

rule
If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (gross proceeds) should show the total amount you received for your home.
However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Instead, box 4 will be checked to indicate your receipt or expected receipt of these items.
taxmap/pubs/p523-001.htm#en_us_publink1000200630

Amount Realized(p4)

rule
The amount realized is the selling price minus selling expenses.
taxmap/pubs/p523-001.htm#en_us_publink1000200631

Selling expenses.(p4)

rule
Selling expenses include:
taxmap/pubs/p523-001.htm#en_us_publink1000200632

Adjusted Basis(p4)

rule
While you owned your home, you may have made adjustments (increases or decreases) to the basis. This adjusted basis must be determined before you can figure gain or loss on the sale of your home. For information on how to figure your home's adjusted basis, see Determining Basis, later.
taxmap/pubs/p523-001.htm#en_us_publink1000200634

Amount of Gain or Loss(p4)

rule
To figure the amount of gain or loss, compare the amount realized to the adjusted basis.
taxmap/pubs/p523-001.htm#en_us_publink1000200635

Gain on sale.(p4)

rule
If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable.
taxmap/pubs/p523-001.htm#en_us_publink1000200636

Loss on sale.(p4)

rule
If the amount realized is less than the adjusted basis, the difference is a loss. Generally, a loss on the sale of your main home cannot be deducted.
taxmap/pubs/p523-001.htm#en_us_publink1000200637

Jointly owned home.(p4)

rule
If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer.
taxmap/pubs/p523-001.htm#en_us_publink1000200638
Separate returns.(p4)
If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Your ownership interest is generally determined by state law.
taxmap/pubs/p523-001.htm#en_us_publink1000200639
Joint owners not married.(p5)
If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Each of you applies the rules discussed in this publication on an individual basis.
taxmap/pubs/p523-001.htm#en_us_publink1000200640

Dispositions Other Than Sales(p5)

rule
Some special rules apply to other dispositions of your main home.
taxmap/pubs/p523-001.htm#en_us_publink1000200641

Foreclosure or repossession.(p5)

rule
If your home was foreclosed on or repossessed, you have a disposition. See Publication 4681 to determine if you have ordinary income, gain, or loss.
taxmap/pubs/p523-001.htm#en_us_publink1000200646
More information.(p5)
If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession.
taxmap/pubs/p523-001.htm#en_us_publink1000200647

Abandonment.(p5)

rule
If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss.
taxmap/pubs/p523-001.htm#en_us_publink1000200652

Trading (exchanging) homes.(p5)

rule
If you trade your old home for another home, treat the trade as a sale and a purchase.
taxmap/pubs/p523-001.htm#en_us_publink1000200653

Example.(p5)

You owned and lived in a home with an adjusted basis of $41,000. A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000).
If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed).
taxmap/pubs/p523-001.htm#en_us_publink1000200654

Transfer to spouse.(p5)

rule
If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). This is true even if you receive cash or other consideration for the home. As a result, the rules explained in this publication do not apply.
If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. You have no gain or loss.
taxmap/pubs/p523-001.htm#en_us_publink1000200655
Exception.(p5)
These transfer rules do not apply if your spouse or former spouse is a nonresident alien. In that case, you generally will have a gain or loss.
taxmap/pubs/p523-001.htm#en_us_publink1000200656
More information.(p5)
See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information.
taxmap/pubs/p523-001.htm#en_us_publink1000200657

Involuntary conversion.(p5)

rule
You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned).