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Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 3360
Experience:  18+ years of experience in tax preparation; 25+ years of experience as a real estate/corporate paralegal.
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I think I need to file an amended 2013 return. My ex-husband

Customer Question

I think I need to file an amended 2013 return. My ex-husband and I sold a home in June 2013 (primary residence/sold after divorce was final) for less than our purchase price. I prepared my own taxes (single/head of household) and included the sale of the home, despite the capital loss of $80k. The IRS has now sent a letter stating I owe $120k in taxes for the sale of the home because I used the total sale price (my mistake--should have only done 1/2 of price since not filing jointly) and total closing costs, but the 1099-S only had half the sales price (I never received a copy of a 1099-S at the time and didn't know to be looking for one), but have received a copy now. Am I correct that the amended return should be 1/2 the sales price and 1/2 the closing/real estate costs? How about the first time homebuyer's credit? Do I adjust that for 1/2 of the $8,000 as well? Thanks for any help. And let me know if more information would be helpful.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.

You are correct that you should only use the half as it is related to your potion of ownership. As this was your personal residence you cannot claim the loss against other gains or income but you would still need to report that sell so the IRS knows of the actual situation for no tax to you.
If you received the credit then you are only liable for half of any repayment for the Homebuyer Credit.

I sincerely ***** ***** is helpful.

Expert:  Robin D. replied 1 year ago.
Make sure to address the notice you received and mark that you disagree with the extra tax.
Let me know if you need more information about amending.
Expert:  Barbara replied 1 year ago.
Different expert here - my name is ***** ***** I have a different answer as well as additional information you will find helpful.
Based on the amount received for the first time homebuyer credit of $8,000, that credit amount was issued in 2009, and you do NOT need to repay the FTHBC for a home you purchased in 2009 or 2010 if it remains your main home for the three years after the purchase. If you sold the home in 2013, you have met the three-year requirement, and no repayment is required.
Also, whoever issued the 1099-S did so in error because the sale was of your primary residence. If the sale had resulted in a capital gain, you would also have been entitled to claim the sale of home exclusion ($250,000 for filing single).
Please let me know if I can assist you further.
Thank you and best regards,
Expert:  Robin D. replied 1 year ago.

I disagree with the added information above.

The 1099S was not issued in error unless you advised that the property was your main home.

Sale or exchange of a residence (including stock in a cooperative housing corporation) for $250,000 or less if you received an acceptable written assurance (certification) from the seller that such residence is the principal residence (within the meaning of section 121) of the seller and the full amount of the gain on such sale is excludable from gross income under section 121.

Unless you gave them a written statement the issuance was correct. You just need to amend as you thought at the first and report the correct information so the IRS understands.

Expert:  Barbara replied 1 year ago.
The responsibility falls on the title company/closing agent to ask you if the property being sold is your primary residence. The answer you provide governs whether a 1099-S is issued, and the title company/closing agent is the entity that issues the 1099-S. Their issuance of the 1099-S in error caused the IRS to view the sale as a taxable event and is causing you to provide information that it was your primary residence.
Best regards,
Customer: replied 1 year ago.
Thank you to both of you! The 1099-S was issued by the buyer's attorney and he was well aware it was our primary residence, and the letter from the IRS states the issue stems from the sale of a primary residence as reported by that attorney. But I don't know if that would have been in writing, as you say, or just part of the overall transaction discussion. Yes, Barb, you are correct, I don't need to repay the FHBC as we entered into contract in March 2010 (closed May 2010) and sold the home in June 2013, so just barely eeked by at 37 months! But of course, since the sale itself is being reported, I had to include the credit on there as well - both TurboTax and H&R Block software required that info. Fortunately, it's all ok on that front - but did need to amend the figures to match of course. I made the decision to go ahead and prepare an amended return with updated figures to send along with my response to the IRS. According to their letter, it's not necessary that they can do it for me, but, well... Hopefully I've provided enough information to them that it will be overkill and, well, kill this thing. My half of the "proceeds" was $297k (so $595k sale price) but original purchase price (excluding taxes, closing costs, etc) was $680k so while my half of the sale was more than $250k as a single, there was no gain, just a $90k loss. If I had the extra $297k in income they claim I have, I wouldn't be worrying about replacing my dishwasher ;o)
Expert:  Barbara replied 1 year ago.
There is a document that the closing agent (in your case the buyer's attorney) has the seller sign when the property being sold is the seller's personal residence so a 1099-S is not issued to the seller.
You've handled this perfectly.
The IRS can only react with the information they are given. Unfortunately, you were the one who has to correct the mistake.
Best regards,