Chapter 3
Rules for Sales Before May 7, 1997

The rules in this chapter are the rules that applied if you sold a main home before May 7, 1997. These rules may still apply to you in some cases. See Who the rules in this chapter apply to, next.

The main topics in this chapter are:

• Rules that allowed you to postpone gain on the sale of a home before May 7, 1997,
• What you may have to report now if you did postpone gain, and
• Rules that allowed you to exclude gain on the sale of a home before May 7, 1997, if you were age 55 or older.

Who the rules in this chapter apply to. The rules in this chapter still apply to you only if you sold your main home at a gain before May 7, 1997, and all three of the following statements are true.

1. You postponed the gain as described in this chapter.
2. The 2-year period you had to replace that home (your replacement period) was suspended while you either:
   1. Served in the Armed Forces, or
   2. Lived and worked outside the United States.
3. You have not already reported to the IRS either your purchase of a new home within your replacement period or a taxable gain resulting from the end of your replacement period, as described under What To Report Now, later in this chapter.

Gain. If you had a gain from the sale, you had to include it in your income for the year of sale, except for any part you postponed or excluded.

Loss. If you had a loss from the sale, you could not deduct it.

How to report the sale. Generally, sales covered by this chapter were reported using Form 2119. If the rules in this chapter apply to you, you may have to file a second Form 2119. See What To Report Now, later in this chapter.

Rules That Provided for Postponing Gain

What To Report Now

Rules That Allowed One-Time Exclusion of Gain

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