Sale of rental eligible for exclusion

[imjulier]

Hey-

I wanted all my big issues to be done after tax season but then I find out a client sold a rental (was primarily primary residence) at a considerable gain. So, its been a rental for a year after she lived in it for about 3-4 years (I still have to get the details). I do know she will qualify for the section 121 exclusion except for the non-qualified use during the rental period. I believe I am just asking a "how do you do this in ATX" question. So, calculate gain on form 4797 part 3 as $60K. Sec 121 exclusion on line 2 is -$250K (just like the instructions so far). Passing thru to line 14 of the 1040 the remaining part of the exclusion of -$190K. Can't change the exclusion to be just amount used on line 2 of 4797 or in the detail tab. How do I do that? Do I need 8949 or Sch D? Also, I will have to calculate the gain that can be excluded due to non-qualified use, this appears to be a manual calculation but would I just adjust the -250K in form 4797 as appropriate? So far, I have just done a bulk disposition and marked it as personal residence. Appreciate any help....I know what the bottom line should be, just can't get there in ATX.

Thanks,

Julie

[joanmcq]

I haven't done one yet in the new program, but in 2011 & prior years I had to do a manual entry on the 4797 to get the exclusion to deduct from the reported gain.

[imjulier]

Yes, the only way I can see to make this work is just to override and make it manual.

[Max W]

Use form 8949 and click on the "Sale Principal Residence" worksheet.

Here you can account for the depreciation of the rental and put in the days of non-qualified use as a residence.

It will prorate the Sec 121 exclusion and carry the proper amounts to the form with codes appearing in col f indicating what was done.

No need for 4797.

[joanmcq]

If the property was sold directly after the rental period, it belongs on the 4797. If it was personal residence after it was a rental, then the sale is on the 8949/Sch D.

You have to tweak the 4797.

[imjulier]

Thanks Joan and Max for your responses. As it ends up, I had this backward in my head, no NQ use if it went from personal to rental and the requirements for the exclusion are met. All except depreciation will be excluded. Instructions say to put it on the 4797 so that is what I will do and tweak it so I get the right bottom line. This definitely is not working as it should in ATX but everything can't be perfect. Yeah, one problem down.

[Max W]

If the property was sold directly after the rental period, it belongs on the 4797. If it was personal residence after it was a rental, then the sale is on the 8949/Sch D.

You have to tweak the 4797.

If it is only rented for a short period, less than a year, and the intention at the time of rental is to sell and not keep it, you can still use Sch D.