Solved

Sale of Second Home - Capital Gain or Loss Reporting

Forum|Forum|4 years ago
January 21, 2022
2 replies
0 views

Hello, my wife had a house that was used as second home. She sold her house in 2021. We are filing a joint return and I am trying to figure out the followings:

1. She put in a new roof and new driveway in 2014. According to page 9 of pub 523, both the roof and driveway are improvements that can be added to the cost basis. Total was about $10,000. Would I add the full $10M to the cost basis, or would I need to use the depreciated amount, i.e., $10,000 minus $2,500 (for the last 6 years, estimated) = $7,500?

2. As a divorce settlement, she paid her ex-husband $11,000, to get the house fully in her name. If the original price of the house was $90,000 when they jointly purchased the house, what can she use as the cost basis of the house? Can she add the $11,000 that she paid her ex to the $90M original purchase price to increase the cost basis?

3. It appears the repair and cleaning costs done by outside companies, and the supplies that we purchased on our own were part of the sales expenses? If so, how do we report them, as adjustment to costs in column g of Form 8949?

3. My wife, her sister, and I all spent time to repair and clean the house for it to be ready to sell. Can we report the time that we spent as part of the cost basis? If so, what should I use as the hourly rate?

3. I looked at the TurboxTax software (schedule D and form 8949), it does not appear to have an input option for sale of second home (it does for main home), where and how do I input the sale of second home?

Thank you for your help in advance.

Best answer by DianeW777

1. Yes for question one you will add the new roof and driveway at the full cost of $10,000, to the cost basis of the second home.

2. Normally transfers between spouses in a divorce settlement are not taxable by the recipient and not deductible by the payer. If this was fees to transfer the property in the name of your spouse it will not be part of the cost basis of the second home. Her cost basis will be the original cost they paid for it. The basis in property received from your spouse (or former spouse, if incident to your divorce) is the same as your spouse's adjusted basis. This applies for determining either gain or loss when you later dispose of the property.

3. Cleaning and repairs are normal maintenance and not allowed to be used as selling expenses. Expenses you incur that physically affect the home are not deductible from the sales proceeds, even if they help sell the property. For example, you can't deduct the cost of cleaning the carpets in your home, repainting, or hiring a lawncare. .You can use any settlement fees such as commissions, legal fees as part of your sales expenses.

4. My wife, her sister, and I all spent time to repair and clean the house for it to be ready to sell. Can we report the time that we spent as part of the cost basis? No, the IRS specifically states that your own labor is not allowed to be used for any tax purpose.

5. The second home sale can be entered into TurboTax CD or Desktop version by following the steps below. (See the third image)

Open your TurboTax account > Wages & Income
Scroll to Investment Income > Select Stocks, Mutual Funds, Bonds, Other > Start or Update
Select the type of sale (see image below)
Enter the details of the property sold - Select Second Home from the dropdown continue to enter your information
Continue to finish your sale.
See the images below.

The gain from the sale will be fully taxable because a second home is not eligible for the home sale exclusion. See the image below for assistance. Whether you specifically select Second Home is not relevant for the tax return itself.

D

DianeW777Answer

1. Yes for question one you will add the new roof and driveway at the full cost of $10,000, to the cost basis of the second home.

2. Normally transfers between spouses in a divorce settlement are not taxable by the recipient and not deductible by the payer. If this was fees to transfer the property in the name of your spouse it will not be part of the cost basis of the second home. Her cost basis will be the original cost they paid for it. The basis in property received from your spouse (or former spouse, if incident to your divorce) is the same as your spouse's adjusted basis. This applies for determining either gain or loss when you later dispose of the property.

3. Cleaning and repairs are normal maintenance and not allowed to be used as selling expenses. Expenses you incur that physically affect the home are not deductible from the sales proceeds, even if they help sell the property. For example, you can't deduct the cost of cleaning the carpets in your home, repainting, or hiring a lawncare. .You can use any settlement fees such as commissions, legal fees as part of your sales expenses.

4. My wife, her sister, and I all spent time to repair and clean the house for it to be ready to sell. Can we report the time that we spent as part of the cost basis? No, the IRS specifically states that your own labor is not allowed to be used for any tax purpose.

5. The second home sale can be entered into TurboTax CD or Desktop version by following the steps below. (See the third image)

Open your TurboTax account > Wages & Income
Scroll to Investment Income > Select Stocks, Mutual Funds, Bonds, Other > Start or Update
Select the type of sale (see image below)
Enter the details of the property sold - Select Second Home from the dropdown continue to enter your information
Continue to finish your sale.
See the images below.

The gain from the sale will be fully taxable because a second home is not eligible for the home sale exclusion. See the image below for assistance. Whether you specifically select Second Home is not relevant for the tax return itself.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

M

Mike9241

assuming this was not your spouse's principal residence for 2 out of 5 years before the sale, there is no hone sale exclusion. however, if it was her main home for 2 out 5 years, then the home sale exclusion may be available.

T

tedtompkins

where/how do I report the sale of a second home? reporting capital gains?

DMarkM1

You can enter the sale of a second home under the "Investments and savings" topic as you would a sale of stock.

"Show More"
"Start/revisit" the "Stocks, mutual funds..." topic
"Add an Investment"
"Continue"
"Enter another way"
Select "Other (second home)" tile
Select "Second Home" in the "Type of Investment" dropdown

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

S

syoung123Author

Hello I am using the CD window version of TurboTax Premier and cannot find the way to input second home. Under the "wages and income" -> "investment income" -> "stocks, mutual funds, bonds, other", I first put in the stock sales, there is a "add more sales" button on the bottom. When I clicked on it, it asks if I got a 1099B, so I said no since this is a house sale and I got a 1099S. And then the screen showed "tell us about this sale" with lines such as description, date sold, sales process etc. In the drop-down box on on the bottom, I can choose box C or F. When I chose box F, it went to the next screen with lines such as "accrued market discount" and the bottom button says "done". Whe I clicked done, it went to a couple more screens, but I cannot see an option for second home as the instruction in your reply indicated. Please advise. Thank you.