Question

Principal residence exclusion on Installment sale of a principal residence turned rental

Forum|Forum|6 years ago
October 24, 2019
1 reply
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I am not able to input in TurboTax an installment on primary residence turned rental, and get the 250000 exclusion. The case as follows: I lived in the home for 2 of the last five, I rented for the following 2 and I sold. When I try to do an installment sale it does not allow me to input the homeowners exclusions for the 2 years that I lived. In the case when you do an installment sale on home that has not been converted to a rental, Turbotax allows the exclusion. However, I am not able to input the exclusion in my case. Is this a functionality that Turbotax does not have yet, or It is something disallowed by IRS. If it is just a functionality, I can manually input the exclusion in line 15 of form 6252 and redo the math. A TurboTax representative was not able to help me on the phone with an answer to this question.

TurboTax Premier Windows

A

Anonymous_

Employee

Have you tried "selling" the asset (residence) in the Rental Properties and Royalties section? I have not tested your scenario but I believe that the Step-by-Step (interview mode) contains screens that inquire as to whether the sale would qualify for the Section 121 exclusion and also whether it was an installment sale. However, I am not certain whether you would encounter both situations.

You could try, although it also may not work properly, entering the transaction in the Rental Properties and Royalties section as a sale of a rental property that qualifies for the home sale exclusion and then entering the same sale in the Sale of Business Property section. For the latter you would report the transaction as an installment sale and "link" the sale to the Schedule E sale. This obviously gets extremely complicated and errors are likely to result that need to somehow be resolved. Further, for the sale of Business Property section, you will have to be using TurboTax Self-Employed or TurboTax Home & Business (preferably the latter since it supports Forms Mode).

If all else fails, you could complete the transaction in Forms Mode (if you know what you are doing) after at least partially entering the transaction in Step-by-Step mode. However, your profile indicates that you are using an online version of TurboTax and the online versions do not support Forms Mode. Therefore, you would have to switch to a desktop (installed) version of TurboTax so that you would have access to Forms Mode.