Rental Real Estate Property Sale - Non Main Home

Forum|Forum|3 years ago
April 28, 2023
1 reply
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Greetings. Preparing for 2023 individual tax filing and any prepayments needed.

Query: Can I partially exclude sale gains? Also, how to file depreciation recapture?

Scenario: Bought single-family dwelling in GA in 1996. Lived in dwelling until 2000. Moved from home due to active duty military change-of-station. Made home a rental property after moving. Retired from active duty in 2012. Continuous rental property until home sold in April 2023. Cost basis and adjusted basis are less than sale proceeds. Therefore, the sale realized a gain.

IRS Publication 523, page 6, states partial exclusion possibility due to work-related move greater than 50 miles. The change of station, active duty, was greater than 50 miles. Publication 523, page 11, Business or Rental Use of Home, states a five and ten-year period exemption exclusion after last day of home use and serving on qualified extended duty as a member of the uniformed services.

Is any of the capital gain excludable? Do I use worksheet 2 and 3 of Pub. 523? Do I use IRS Form 8949 only? Or must I also use 4797 and, if so, what section of the 4797?

Thank you sincerely for your assistance in the query!

Not A Product Question

Carl11_2

Employee

Retired from active duty in 2012. Continuous rental property until home sold in April 2023

Unfortunately, you do not qualify for even a partial exclusion. Your maximum allowed 10-year suspension of the "2 of last 5" rules ended before you retired over 10 years ago prior to the sale.

The suspension started in 2000 on the day you moved out, and ended in 2010. In order to have qualified for the full exclusion the property needed to be sold by/in 2013. For a partial exclusion, by/in 2015.

smiddaughAuthor

Good morning, Carl, and thank you for this reply. I understand the 2 and 5 along with the total 15 aspects. However, publication 523 states the potential to partially exclude if the property was a rental property except for time after 2008. Might you have insight on this potential exclusion?

Thank you!

Steve