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Because the home has not been your principal residence for 2 out of the last 5 years, the fact that it was your residence is irrelevant to your tax situation.
As a rental property
, both the passive activity losses on this rental from prior years and the loss on the sale will be deductible
in 2013. Your 1.25 million dollar basis will increase by the purchase and sale settlement charges of 96,400 dollars to 1,312,700 dollars.
Line 14, from Form
4797, Part II -- Sale of the Rental Home Loss -172,700 Dollars
Line 17, from Schedule E
, Page 1 -- Passive Loss Carryover Deductible in Year The Passive Activity is terminated - 114,600 Dollars
Line 22 -- Total Loss -287,300
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