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.
The selling price is the total amount you receive for your home. It
includes money, all notes, mortgages, or other debts assumed by the
buyer as part of the sale, and the fair market value of any other
property or any services you receive.
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, and lawn equipment. Separately stated cash you
received for these items should not be shown on Form 1099-S,
Proceeds from Real Estate Transactions (discussed later).
Payment by employer.
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 in box 1 of your Form W-2 and you
will include it on line 7 of Form 1040.
Option to buy.
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 line 21 of Form 1040.
If you received Form 1099-S, box 2 should show the total
amount you received for your home.
However, box 2 will not include the fair market value of any
property other than cash or notes, or any services, you received or
will receive. Instead, box 4 will be checked.
If you can exclude the entire gain, the person responsible for
closing the sale generally will not have to report it on Form
1099-S. You will use sale documents and other records to figure
the total amount you received for your home.
The amount realized is the selling price minus selling expenses.
Selling expenses include commissions, advertising fees, legal fees,
and loan charges paid by the seller, such as loan placement fees or
While you owned your home, you may have made adjustments (increases
or decreases) to the basis. This adjusted basis is used to figure gain
or loss on the sale of your home. For information on how to figure
your home's adjusted basis, see Basis, later.
Amount of gain or loss.
When you know the amount realized and the home's adjusted basis,
you can figure your gain or loss. 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.
If the amount realized is less than the adjusted basis, the
difference is a loss. A loss on the sale of your main home cannot be
Jointly owned home.
If you and your spouse sell your jointly owned home and file a
joint return, you figure your gain or loss as one taxpayer.
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 determined by state law.
Joint owners not married.
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.
If you trade your old home for another home, treat the trade as a
sale and a purchase.
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 house 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
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
Foreclosure or repossession.
If your home was foreclosed on or repossessed, you have a sale.
You figure the gain or loss from the sale in generally the same way
as gain or loss from any sale. But the amount of your gain or loss
depends, in part, on whether you were personally liable for repaying
the debt secured by the home, as shown in the following chart.
If you were not personally liable
If you were personally liable for the canceled debt, you may have
ordinary income in addition to any gain or loss. If the canceled debt
is more than the home's fair market value, you have ordinary income
equal to the difference. Report that income on line 21, Form 1040.
However, the income from cancellation of debt is not taxed to you if
the cancellation is intended as a gift, or if you are insolvent or
bankrupt. For more information on insolvency or bankruptcy, see
Publication 908, Bankruptcy Tax Guide.
Form 1099-A and Form 1099-C.
Generally, you will receive Form 1099-A, Acquisition or
Abandonment of Secured Property, from your lender. This form
will have the information you need to determine the amount of your
gain or loss and any ordinary income from cancellation of debt. If
your debt is canceled, you may receive Form 1099-C,
Cancellation of Debt.
If part of your 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.
If you abandon your home, you may have ordinary income. If the
abandoned home secures a debt for which you are personally liable and
the debt is canceled, you have ordinary income equal to the amount of
If the home is secured by a loan and the lender knows the home has
been abandoned, the lender should send you Form 1099-A or Form
1099-C. See Foreclosure or repossession, earlier, for
information about those forms. If the home is later foreclosed on or
repossessed, gain or loss is figured as explained in that discussion.
Transfer to spouse.
If you transfer your home to your spouse, or to your former spouse
incident to your divorce, you generally 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. Therefore,
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.
A transfer of your home to your spouse, or to your former spouse
incident to divorce, does not affect the basis of any new home you buy
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
See Property Settlements in Publication 504,
Divorced or Separated Individuals, if you need more
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