Publication 554 - Older Americans' Tax Guide - 2004 Page 15
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Because the insured has a financial interest in the
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You sold your main home after October 22, 2004,
business of the other person.
and
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You acquired your main home in a like-kind ex-
change.
Sale of Home
A like-kind exchange is an exchange of property held for
productive use in a trade or business or for investment.
You may be able to exclude from income any gain up to
See Publication 523 for more information.
$250,000 ($500,000 on a joint return in most cases) on the
sale of your main home. If you can exclude all of the gain,
you do not need to report the sale on your tax return.
Married Persons
Maximum Amount of Exclusion
If you and your spouse file a joint return for the year of sale,
you can exclude gain if either spouse meets the ownership
and use tests. See Maximum Amount of Exclusion, earlier.
You can exclude up to $250,000 of the gain on the sale of
your main home if all of the following are true.
Death of spouse before sale. If your spouse died and
•
you did not remarry before the date of sale, you are
You meet the ownership test.
considered to have owned and lived in the property as your
•
You meet the use test.
main home during any period of time when your spouse
•
owned and lived in it as a main home.
During the 2-year period ending on the date of the
sale, you did not exclude gain from the sale of an-
Home transferred from spouse. If your home was trans-
other home.
ferred to you by your spouse (or former spouse if the
transfer was incident to divorce), you are considered to
You can exclude up to $500,000 of the gain on the sale
have owned it during any period of time when your spouse
of your main home if all of the following are true.
owned it.
•
You are married and file a joint return for the year.
Use of home after divorce. You are considered to have
•
Either you or your spouse meets the ownership test.
used property as your main home during any period when:
•
•
Both you and your spouse meet the use test.
You owned it, and
•
•
During the 2-year period ending on the date of the
Your spouse or former spouse is allowed to live in it
under a divorce or separation instrument and uses it
sale, neither you nor your spouse excluded gain
as his or her main home.
from the sale of another home.
Business Use or Rental of Home
Ownership and Use Tests
You may be able to exclude your gain from the sale of a
To claim the exclusion, you must meet the ownership and
home that you have used for business or to produce rental
use tests. This means that during the 5-year period ending
income. But, you must meet the ownership and use tests.
on the date of the sale, you must have:
See Publication 523 for more information.
•
Owned the home for at least 2 years (the ownership
Depreciation after May 6, 1997. If you were entitled to
test), and
take depreciation deductions because you used your
•
Lived in the home as your main home for at least 2
home for business purposes or as rental property, you
years (the use test).
cannot exclude the part of your gain equal to any deprecia-
tion allowed or allowable as a deduction for periods after
May 6, 1997. See Publication 523 for more information.
Exception to ownership and use tests. If you owned
and lived in the property as your main home for less than 2
Reporting the Sale
years, you still can claim an exclusion in some cases.
Generally, you must have sold the home due to a change
Do not report the 2004 sale of your main home on your tax
in place of employment, health, or unforeseen circum-
return unless:
stances. The maximum amount you can exclude will be
•
reduced. See Publication 523, Selling Your Home, for
You have a gain and you do not qualify to exclude all
more information.
of it, or
•
You have a gain and you choose not to exclude it.
Exception to ownership test for property acquired in a
like-kind exchange. You must have owned your main
If you have any taxable gain on the sale of your main home
home for at least five years to qualify for the exclusion if
that cannot be excluded, report the entire gain on Sched-
you meet both of the following conditions.
ule D (Form 1040). If you used your home for business or
Chapter 2 Taxable and Nontaxable Income
Page 15
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