File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Tax Return 1040nr

How To File An Amended Tax Return For 2012Free File Amended Tax ReturnIncome Tax 1040 Ez1040ez Form 20111040ez InstructionsState Tax Online Filing1040 Ez File OnlineFile An Amended Return OnlineHr Block Free EfileTax Rates And TablesFree State Tax Filing OnlineE File State Tax For FreeEfile Free Federal And StateMilitary Taxes By State1040 Ez Form OnlineIrs 2011 Tax FormsFillable 1040x Form2012 Tax Filing OnlinePrintable 1040ez Federal Tax Form2012 Taxes FreeH&r Block Free FileVita Tax LocationsFree Tax Preparation1040x HelpFiling Tax AmendmentsForm 1040ezHow Do I File Taxes As A StudentHr Block Free Tax FilingIrs E File 20122011 Form 1040Free Online Tax Filing State And FederalTaxact.com1040ez For 2012Free E File 1040x1040ez Free FilingHow To File Back Income TaxesIrs Form 1040ezVita Tax Program 2012 LocationsTaxact 2011 Free Federal Edition DownloadState Tax Filing Free

Tax Return 1040nr

Tax return 1040nr 3. Tax return 1040nr   Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Tax return 1040nr This chapter explains the limits and rules for deducting the costs of gifts. Tax return 1040nr $25 limit. Tax return 1040nr   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Tax return 1040nr A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Tax return 1040nr   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Tax return 1040nr This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. Tax return 1040nr   If you and your spouse both give gifts, both of you are treated as one taxpayer. Tax return 1040nr It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Tax return 1040nr If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Tax return 1040nr Example. Tax return 1040nr Bob Jones sells products to Local Company. Tax return 1040nr He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. Tax return 1040nr They paid $80 for each gift basket, or $240 total. Tax return 1040nr Three of Local Company's executives took the gift baskets home for their families' use. Tax return 1040nr Bob and Jan have no independent business relationship with any of the executives' other family members. Tax return 1040nr They can deduct a total of $75 ($25 limit × 3) for the gift baskets. Tax return 1040nr Incidental costs. Tax return 1040nr   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Tax return 1040nr   A cost is incidental only if it does not add substantial value to the gift. Tax return 1040nr For example, the cost of gift wrapping is an incidental cost. Tax return 1040nr However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Tax return 1040nr Exceptions. Tax return 1040nr   The following items are not considered gifts for purposes of the $25 limit. Tax return 1040nr An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Tax return 1040nr Examples include pens, desk sets, and plastic bags and cases. Tax return 1040nr Signs, display racks, or other promotional material to be used on the business premises of the recipient. Tax return 1040nr    Figure B. Tax return 1040nr When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Tax return 1040nr (Do not use this chart if your home is your principal place of business. Tax return 1040nr See Office in the home . Tax return 1040nr ) Please click here for the text description of the image. Tax return 1040nr Figure B. Tax return 1040nr When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. Tax return 1040nr 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. Tax return 1040nr   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Tax return 1040nr However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Tax return 1040nr    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Tax return 1040nr You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Tax return 1040nr   You can change your treatment of the tickets at a later date by filing an amended return. Tax return 1040nr Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Tax return 1040nr    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Tax return 1040nr You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Tax return 1040nr Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Safeguards Program

The Safeguards Program and staff are responsible for ensuring that federal, state and local agencies receiving federal tax information protect it as if the information remained in IRS’s hands.

These agencies and their contractors receiving federal tax information must protect the confidentiality of return information and are periodically reviewed by Safeguards personnel to ensure they meet the safeguarding requirements of IRC 6103(p)(4). These requirements include employee awareness programs, proper disposal, secure storage and computer security among others.

Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (PDF)
This document contains specific requirements for safeguarding federal tax information. This revision becomes effective on Jan. 1, 2014.

Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (PDF)
This revision of 1075 became effective on Aug. 24, 2010 and is superceded by the Jan. 1, 2014 version.

Comments and suggestions on the revised Publication 1075 can be forwarded to the safeguards mailbox at: safeguardreports@irs.gov.

Additional Requirements for Publication 1075
Safeguarding requirements may be supplemented or modified between editions of Publication 1075 by guidance issued by the Office of Safeguards.
 

ALERTS

See “Safeguards Alert Memorandums” below for trending security concerns.


Publication 1075

Recommendations on How to Become Compliant with the New Requirements
Given the significant changes in technical safeguards requirements found in Sections 4, 5 and 6, the IRS has some recommendations for agencies to become compliant with the new requirements.

Reporting Requirements
Publication 1075 requires agencies to use approved report templates and to transmit the reports electronically. These reports must be encrypted and submitted to the safeguardreports@irs.gov mailbox.

Reporting Unauthorized Accesses, Disclosures or Data Breaches
Local, state and federal agencies receiving federal tax information must follow the revised provisions of Section 10 of Publication 1075 (PDF) upon discovering a possible improper inspection or disclosure of FTI, including breaches and security incidents. Agencies must contact Treasury Inspector General for Tax Administration and the IRS Office of Safeguards immediately, but no later than 24-hours after identification of a possible issue involving federal tax information. Agencies are not to wait until after their own internal investigation as been conducted.

Contacting TIGTA is critical to expedite the recovery of compromised data and identify potential criminal acts. The IRS Office of Safeguards investigation focuses on identifying processes, procedures or systems within the agency with inadequate security controls which led to the incident.

Internal Inspections Reports
Section 6.3 of Publication 1075, Tax Information Security guidelines for Federal, State and Local Agencies and Entities, requires that agencies receiving federal tax information (FTI) establish a review cycle for internal inspections of headquarters offices and all local/field offices that receive FTI. The Internal Inspections Report – Headquarters Office and Internal Inspections Report – Field Office are for these inspections. 

In addition, these agencies must also include an internal inspection of IT operations, using the Internal Inspections Report – IT Operations. Internal inspections of contractors with access to FTI and any off-site storage facilities must also be completed. All scheduled and completed internal inspections should be provided to the IRS Office of Safeguards on the Internal Inspections Implementation Report.

Safeguards Technical Assistance by Topic
The IRS has recommendations and discussions on various Safeguards Program topics available for agencies to help stay in compliance. These documents may assist with preparation of reports, protecting federal tax information, and knowing the legalities of the Safeguards Program.

IRS Disclosure Awareness Videos
IRS Disclosure Awareness training videos are available for local, state and federal governmental agencies that receive federal tax information (FTI). The IRS Office of Safeguards created videos (with captions in English and Spanish) to help explain several key concepts in protecting the confidentiality of FTI.

References/Related Topics

Physical Security and Disclosure References/Related Topics
Publication 1075 requirements pertaining to the protection of FTI in a physical environment and the disclosure of FTI to other persons are available in the Safeguard Disclosure Security Evaluation Matrix.

Document

Version

Release Date

Safeguard Disclosure Security Evaluation Matrix (SDSEM) (XLS)

3.0

9/12/2012


Safeguards Alert Memorandums
The following resources address recent security trends regarding the protection of FTI.

Document

Version

Release Date

Alert Memo – Multi-factor Authentication Implementation

N/A

6/17/2013

Alert Memo – Protecting FTI On Mainframes with Open Port 23

N/A

6/17/2013


Computer Security Compliance References/Related Topics
The following Computer Security Evaluation Matrix (SCSEM) downloads are available for use in preparing an IT environment that will receive, process, or store FTI.

Document

Version

Release Date

Application – Generic Application SCSEM (XLS)

1.3

9/26/2013

Application – GenTax SCSEM (XLS)

1.3

9/26/2013

Application – Internet Explorer SCSEM (XLS)

1.2

9/26/2013

Database – DB2 SCSEM (XLS)

1.2

2/12/2013

Database – Oracle 11g SCSEM (XLS)

1.1

9/26/2013

Database – Oracle 10g SCSEM (XLS)

1.3

9/26/2013

Database – Oracle 9i SCSEM (XLS)

1.2

2/12/2013

Database – SQL Server 2000 SCSEM (XLS)

1.2

2/12/2013

Database – SQL Server 2005 SCSEM (XLS)

1.2

2/12/2013

Mainframe – ACF2 SCSEM (XLS)

1.3

9/26/2013

Mainframe – i5 OS SCSEM (XLS)

1.3

9/26/2013

Mainframe – RACF SCSEM (XLS)

1.3

9/26/2013

Mainframe – Top Secret SCSEM (XLS)

1.3

9/26/2013

Mainframe – UNISYS SCSEM (XLS)

2.4

9/26/2013

Management, Operational and Technical (MOT) (XLS)

2.0

9/27/2013

MOT Appendix – Data Warehouse SCSEM (XLS)

1.3

2/12/2013

MOT Appendix – Multi-functional Device SCSEM (MFD) (XLS)

2.2

2/12/2013

Network – Cisco IOS SCSEM (XLS)

1.2

9/26/2013

Network – Firewall SCSEM (XLS)

1.2

9/26/2013

Network – Network Assessment SCSEM (XLS)

1.2

9/26/2013

Network – Storage Area Network SCSEM (SAN) (XLS)

1.2

9/26/2013

Network – Virtual Private Network (VPN) SCSEM (XLS)

1.2

9/26/2013

Network – Voice Over Internet Protocol (VoIP) SCSEM (XLS)

1.2

9/26/2013

Network – Wireless Local Area Network (LAN) SCSEM (XLS)

1.2

9/26/2013

Other – Cloud Computing SCSEM (XLS)

1.0

4/1/2013

Other - Oracle Public Sector Revenue Management (PSRM) (formerly Enterprise Taxation and Policy Management (ETPM))

1.1

2/5/2014

Other – Generic Operating System SCSEM (XLS)

1.3

2/12/2013

Other – Mobile Devices SCSEM (XLS)

1.0

4/1/2013

Other – OpenVMS SCSEM (XLS)

1.2

9/26/2013

Other - RSI Revenue Premier

1.0

9/23/2013

Other - Teradata

1.0

9/23/2013

Other – Web Server SCSEM (XLS)

1.3

9/26/2013

UNIX and Linux – Solaris, HP-UX, AIX, Red Hat, SuSE SCSEM (XLS)

1.4

2/12/2013

Virtualization – VMWare ESX 4.x SCSEM (XLS)

1.2

2/12/2013

Virtualization – VMWare ESXi 5.x SCSEM (XLS)

1.1

3/7/2013

Microsoft Windows 7 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Server 2003 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Server 2008 and 2008 R2 SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows Vista SCSEM (XLS)

1.2

2/12/2013

Microsoft Windows XP SCSEM (XLS)

1.2

2/12/2013

 

Page Last Reviewed or Updated: 25-Mar-2014

The Tax Return 1040nr

Tax return 1040nr Publication 523 - Main Content Table of Contents Main HomeVacant land. Tax return 1040nr Factors used to determine main home. Tax return 1040nr Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Tax return 1040nr Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Tax return 1040nr Individual taxpayer identification number (ITIN). Tax return 1040nr More information. Tax return 1040nr Comprehensive Examples Special SituationsException for sales to related persons. Tax return 1040nr Deducting Taxes in the Year of SaleForm 1099-S. Tax return 1040nr More information. Tax return 1040nr Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Tax return 1040nr Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Tax return 1040nr ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Tax return 1040nr To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Tax return 1040nr Land. Tax return 1040nr   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Tax return 1040nr Example. Tax return 1040nr You buy a piece of land and move your main home to it. Tax return 1040nr Then, you sell the land on which your main home was located. Tax return 1040nr This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Tax return 1040nr Vacant land. Tax return 1040nr   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Tax return 1040nr If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Tax return 1040nr See Excluding the Gain , later. Tax return 1040nr The destruction of your home is treated as a sale of your home. Tax return 1040nr As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Tax return 1040nr For information, see Publication 547. Tax return 1040nr More than one home. Tax return 1040nr   If you have more than one home, you can exclude gain only from the sale of your main home. Tax return 1040nr You must include in income the gain from the sale of any other home. Tax return 1040nr If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Tax return 1040nr Example 1. Tax return 1040nr You own two homes, one in New York and one in Florida. Tax return 1040nr From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Tax return 1040nr In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Tax return 1040nr You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Tax return 1040nr Example 2. Tax return 1040nr You own a house, but you live in another house that you rent. Tax return 1040nr The rented house is your main home. Tax return 1040nr Example 3. Tax return 1040nr You own two homes, one in Virginia and one in New Hampshire. Tax return 1040nr In 2009 and 2010, you lived in the Virginia home. Tax return 1040nr In 2011 and 2012, you lived in the New Hampshire home. Tax return 1040nr In 2013, you lived again in the Virginia home. Tax return 1040nr Your main home in 2009, 2010, and 2013 is the Virginia home. Tax return 1040nr Your main home in 2011 and 2012 is the New Hampshire home. Tax return 1040nr You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Tax return 1040nr Factors used to determine main home. Tax return 1040nr   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Tax return 1040nr Those factors include the following. Tax return 1040nr Your place of employment. Tax return 1040nr The location of your family members' main home. Tax return 1040nr Your mailing address for bills and correspondence. Tax return 1040nr The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Tax return 1040nr The location of the banks you use. Tax return 1040nr The location of recreational clubs and religious organizations of which you are a member. Tax return 1040nr Property used partly as your main home. Tax return 1040nr   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Tax return 1040nr For details, see Business Use or Rental of Home , later. Tax return 1040nr Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Tax return 1040nr Subtract the adjusted basis from the amount realized to get your gain or loss. Tax return 1040nr     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Tax return 1040nr   Gain is the excess of the amount realized over the adjusted basis of the property. Tax return 1040nr Loss. Tax return 1040nr   Loss is the excess of the adjusted basis over the amount realized for the property. Tax return 1040nr Selling Price The selling price is the total amount you receive for your home. Tax return 1040nr It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Tax return 1040nr Personal property. Tax return 1040nr   The selling price of your home does not include amounts you received for personal property sold with your home. Tax return 1040nr Personal property is property that is not a permanent part of the home. Tax return 1040nr Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Tax return 1040nr Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Tax return 1040nr Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Tax return 1040nr Payment by employer. Tax return 1040nr   You may have to sell your home because of a job transfer. Tax return 1040nr If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Tax return 1040nr Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Tax return 1040nr Option to buy. Tax return 1040nr   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Tax return 1040nr If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Tax return 1040nr Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Tax return 1040nr Form 1099-S. Tax return 1040nr   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Tax return 1040nr   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Tax return 1040nr Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Tax return 1040nr Amount Realized The amount realized is the selling price minus selling expenses. Tax return 1040nr Selling expenses. Tax return 1040nr   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Tax return 1040nr ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Tax return 1040nr This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Tax return 1040nr For information on how to figure your home's adjusted basis, see Determining Basis , later. Tax return 1040nr Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Tax return 1040nr Gain on sale. Tax return 1040nr   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Tax return 1040nr Loss on sale. Tax return 1040nr   If the amount realized is less than the adjusted basis, the difference is a loss. Tax return 1040nr Generally, a loss on the sale of your main home cannot be deducted. Tax return 1040nr Jointly owned home. Tax return 1040nr   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Tax return 1040nr Separate returns. Tax return 1040nr   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Tax return 1040nr Your ownership interest is generally determined by state law. Tax return 1040nr Joint owners not married. Tax return 1040nr   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Tax return 1040nr Each of you applies the rules discussed in this publication on an individual basis. Tax return 1040nr Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Tax return 1040nr Foreclosure or repossession. Tax return 1040nr   If your home was foreclosed on or repossessed, you have a disposition. Tax return 1040nr See Publication 4681 to determine if you have ordinary income, gain, or loss. Tax return 1040nr More information. Tax return 1040nr   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Tax return 1040nr Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Tax return 1040nr Abandonment. Tax return 1040nr   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Tax return 1040nr Trading (exchanging) homes. Tax return 1040nr   If you trade your home for another home, treat the trade as a sale and a purchase. Tax return 1040nr Example. Tax return 1040nr You owned and lived in a home with an adjusted basis of $41,000. Tax return 1040nr A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Tax return 1040nr This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Tax return 1040nr If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Tax return 1040nr Transfer to spouse. Tax return 1040nr   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Tax return 1040nr This is true even if you receive cash or other consideration for the home. Tax return 1040nr As a result, the rules explained in this publication do not apply. Tax return 1040nr   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Tax return 1040nr You have no gain or loss. Tax return 1040nr Exception. Tax return 1040nr   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Tax return 1040nr In that case, you generally will have a gain or loss. Tax return 1040nr More information. Tax return 1040nr    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Tax return 1040nr Involuntary conversion. Tax return 1040nr   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Tax return 1040nr This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Tax return 1040nr Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Tax return 1040nr Your basis in your home is determined by how you got the home. Tax return 1040nr Generally, your basis is its cost if you bought it or built it. Tax return 1040nr If you got it in some other way (inheritance, gift, etc. Tax return 1040nr ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Tax return 1040nr While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Tax return 1040nr The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Tax return 1040nr To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Tax return 1040nr Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Tax return 1040nr Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Tax return 1040nr Purchase. Tax return 1040nr   If you bought your home, your basis is its cost to you. Tax return 1040nr This includes the purchase price and certain settlement or closing costs. Tax return 1040nr In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Tax return 1040nr If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Tax return 1040nr Seller-paid points. Tax return 1040nr   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Tax return 1040nr    IF you bought your home. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr THEN reduce your home's basis by the seller-paid points. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Tax return 1040nr after April 3, 1994 even if you did not deduct them. Tax return 1040nr Settlement fees or closing costs. Tax return 1040nr   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Tax return 1040nr You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Tax return 1040nr A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Tax return 1040nr   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Tax return 1040nr   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Tax return 1040nr   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Tax return 1040nr Real estate taxes. Tax return 1040nr   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Tax return 1040nr    IF. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr AND. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr THEN the taxes. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Tax return 1040nr the seller reimburses you do not affect the basis of your home. Tax return 1040nr the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Tax return 1040nr you reimburse the seller do not affect the basis of your home. Tax return 1040nr Construction. Tax return 1040nr   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Tax return 1040nr   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Tax return 1040nr It also includes certain settlement or closing costs. Tax return 1040nr You may have to reduce your basis by points the seller paid for you. Tax return 1040nr For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Tax return 1040nr Built by you. Tax return 1040nr   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Tax return 1040nr Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Tax return 1040nr Temporary housing. Tax return 1040nr   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Tax return 1040nr To figure the amount of the reduction, multiply the contract price by a fraction. Tax return 1040nr The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Tax return 1040nr Cooperative apartment. Tax return 1040nr   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Tax return 1040nr This may include your share of a mortgage on the apartment building. Tax return 1040nr Condominium. Tax return 1040nr   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Tax return 1040nr Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Tax return 1040nr These situations are discussed in the following pages. Tax return 1040nr Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Tax return 1040nr Other special rules may apply in certain situations. Tax return 1040nr If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Tax return 1040nr Home received as gift. Tax return 1040nr   Use the following chart to find the basis of a home you received as a gift. Tax return 1040nr IF the donor's adjusted basis at the time of the gift was. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr THEN your basis is. Tax return 1040nr . Tax return 1040nr . Tax return 1040nr more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Tax return 1040nr   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Tax return 1040nr If using the fair market value results in a gain, you have neither gain nor loss. Tax return 1040nr equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Tax return 1040nr equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Tax return 1040nr Fair market value. Tax return 1040nr   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Tax return 1040nr If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Tax return 1040nr Part of federal gift tax due to net increase in value. Tax return 1040nr   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Tax return 1040nr The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Tax return 1040nr The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Tax return 1040nr Home acquired from a decedent who died before or after 2010. Tax return 1040nr   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Tax return 1040nr If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Tax return 1040nr If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Tax return 1040nr Surviving spouse. Tax return 1040nr   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Tax return 1040nr The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Tax return 1040nr The basis in your interest will remain the same. Tax return 1040nr Your new basis in the home is the total of these two amounts. Tax return 1040nr   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Tax return 1040nr Example. Tax return 1040nr Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Tax return 1040nr Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Tax return 1040nr Community property. Tax return 1040nr   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Tax return 1040nr When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Tax return 1040nr For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Tax return 1040nr   For more information about community property, see Publication 555, Community Property. Tax return 1040nr    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Tax return 1040nr Home received as trade. Tax return 1040nr   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Tax return 1040nr If you traded one home for another, you have made a sale and purchase. Tax return 1040nr In that case, you may have a gain. Tax return 1040nr See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Tax return 1040nr Home received from spouse. Tax return 1040nr   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Tax return 1040nr Transfers after July 18, 1984. Tax return 1040nr   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Tax return 1040nr In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Tax return 1040nr This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Tax return 1040nr   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Tax return 1040nr This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Tax return 1040nr Your basis in the half interest you already owned does not change. Tax return 1040nr Your new basis in the home is the total of these two amounts. Tax return 1040nr Transfers before July 19, 1984. Tax return 1040nr   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Tax return 1040nr More information. Tax return 1040nr   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Tax return 1040nr Involuntary conversion. Tax return 1040nr   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Tax return 1040nr If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Tax return 1040nr Example. Tax return 1040nr A fire destroyed your home that you owned and used for only 6 months. Tax return 1040nr The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Tax return 1040nr Your gain is $50,000 ($130,000 − $80,000). Tax return 1040nr You bought a replacement home for $100,000. Tax return 1040nr The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Tax return 1040nr The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Tax return 1040nr The basis of the new home is figured as follows. Tax return 1040nr Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Tax return 1040nr   For more information about basis, see Publication 551. Tax return 1040nr Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Tax return 1040nr To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Tax return 1040nr Filled-in examples of that worksheet are included in Comprehensive Examples , later. Tax return 1040nr Recordkeeping. Tax return 1040nr You should keep records to prove your home's adjusted basis. Tax return 1040nr Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Tax return 1040nr But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Tax return 1040nr Keep records proving the basis of both homes as long as they are needed for tax purposes. Tax return 1040nr The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Tax return 1040nr Increases to Basis These include the following. Tax return 1040nr Additions and other improvements that have a useful life of more than 1 year. Tax return 1040nr Special assessments for local improvements. Tax return 1040nr Amounts you spent after a casualty to restore damaged property. Tax return 1040nr Improvements. Tax return 1040nr   These add to the value of your home, prolong its useful life, or adapt it to new uses. Tax return 1040nr You add the cost of additions and other improvements to the basis of your property. Tax return 1040nr   The following chart lists some other examples of improvements. Tax return 1040nr Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Tax return 1040nr   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Tax return 1040nr Example. Tax return 1040nr You put wall-to-wall carpeting in your home 15 years ago. Tax return 1040nr Later, you replaced that carpeting with new wall-to-wall carpeting. Tax return 1040nr The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Tax return 1040nr Repairs. Tax return 1040nr   These maintain your home in good condition but do not add to its value or prolong its life. Tax return 1040nr You do not add their cost to the basis of your property. Tax return 1040nr Examples. Tax return 1040nr Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Tax return 1040nr Exception. Tax return 1040nr   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Tax return 1040nr For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Tax return 1040nr Decreases to Basis These include the following. Tax return 1040nr Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Tax return 1040nr For details, see Publication 4681. Tax return 1040nr Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Tax return 1040nr For details, see Publication 4681. Tax return 1040nr Gain you postponed from the sale of a previous home before May 7, 1997. Tax return 1040nr Deductible casualty losses. Tax return 1040nr Insurance payments you received or expect to receive for casualty losses. Tax return 1040nr Payments you received for granting an easement or right-of-way. Tax return 1040nr Depreciation allowed or allowable if you used your home for business or rental purposes. Tax return 1040nr Energy-related credits allowed for expenditures made on the residence. Tax return 1040nr (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Tax return 1040nr ) Adoption credit you claimed for improvements added to the basis of your home. Tax return 1040nr Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Tax return 1040nr Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Tax return 1040nr An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Tax return 1040nr District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Tax return 1040nr General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Tax return 1040nr Discharges of qualified principal residence indebtedness. Tax return 1040nr   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Tax return 1040nr This exclusion applies to discharges made after 2006 and before 2014. Tax return 1040nr If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Tax return 1040nr   File Form 982 with your tax return. Tax return 1040nr See the form's instructions for detailed information. Tax return 1040nr    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Tax return 1040nr In most cases, this would occur in a refinancing or a restructuring of the mortgage. Tax return 1040nr Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Tax return 1040nr This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Tax return 1040nr To qualify, you must meet the ownership and use tests described later. Tax return 1040nr You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Tax return 1040nr This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Tax return 1040nr You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Tax return 1040nr If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Tax return 1040nr See Publication 505, Tax Withholding and Estimated Tax. Tax return 1040nr Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Tax return 1040nr You meet the ownership test. Tax return 1040nr You meet the use test. Tax return 1040nr During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Tax return 1040nr For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Tax return 1040nr If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Tax return 1040nr You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Tax return 1040nr Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Tax return 1040nr This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Tax return 1040nr Exception. Tax return 1040nr   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Tax return 1040nr However, the maximum amount you may be able to exclude will be reduced. Tax return 1040nr See Reduced Maximum Exclusion , later. Tax return 1040nr Example 1—home owned and occupied for at least 2 years. Tax return 1040nr Mya bought and moved into her main home in September 2011. Tax return 1040nr She sold the home at a gain in October 2013. Tax return 1040nr During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Tax return 1040nr She meets the ownership and use tests. Tax return 1040nr Example 2—ownership test met but use test not met. Tax return 1040nr Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Tax return 1040nr He later sold the home for a gain in June 2013. Tax return 1040nr He owned the home during the entire 5-year period ending on the date of sale. Tax return 1040nr He meets the ownership test but not the use test. Tax return 1040nr He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Tax return 1040nr Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Tax return 1040nr You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Tax return 1040nr Example. Tax return 1040nr Naomi bought and moved into a house in July 2009. Tax return 1040nr She lived there for 13 months and then moved in with a friend. Tax return 1040nr She later moved back into her house and lived there for 12 months until she sold it in August 2013. Tax return 1040nr Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Tax return 1040nr Temporary absence. Tax return 1040nr   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Tax return 1040nr The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Tax return 1040nr Example 1. Tax return 1040nr David Johnson, who is single, bought and moved into his home on February 1, 2011. Tax return 1040nr Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Tax return 1040nr David sold the house on March 1, 2013. Tax return 1040nr Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Tax return 1040nr The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Tax return 1040nr Example 2. Tax return 1040nr Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Tax return 1040nr Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Tax return 1040nr He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Tax return 1040nr Ownership and use tests met at different times. Tax return 1040nr   You can meet the ownership and use tests during different 2-year periods. Tax return 1040nr However, you must meet both tests during the 5-year period ending on the date of the sale. Tax return 1040nr Example. Tax return 1040nr Beginning in 2002, Helen Jones lived in a rented apartment. Tax return 1040nr The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Tax return 1040nr In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Tax return 1040nr On July 12, 2013, while still living in her daughter's home, she sold her condominium. Tax return 1040nr Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Tax return 1040nr She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Tax return 1040nr She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Tax return 1040nr The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Tax return 1040nr Cooperative apartment. Tax return 1040nr   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Tax return 1040nr Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Tax return 1040nr Exception for individuals with a disability. Tax return 1040nr   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Tax return 1040nr Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Tax return 1040nr   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Tax return 1040nr Previous home destroyed or condemned. Tax return 1040nr   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Tax return 1040nr This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Tax return 1040nr Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Tax return 1040nr Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Tax return 1040nr   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Tax return 1040nr You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Tax return 1040nr This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Tax return 1040nr   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Tax return 1040nr Example. Tax return 1040nr John bought and moved into a home in 2005. Tax return 1040nr He lived in it as his main home for 2½ years. Tax return 1040nr For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Tax return 1040nr He then sold the home at a gain in 2013. Tax return 1040nr To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Tax return 1040nr This means he can disregard those 6 years. Tax return 1040nr Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Tax return 1040nr He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Tax return 1040nr Period of suspension. Tax return 1040nr   The period of suspension cannot last more than 10 years. Tax return 1040nr Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Tax return 1040nr You cannot suspend the 5-year period for more than one property at a time. Tax return 1040nr You can revoke your choice to suspend the 5-year period at any time. Tax return 1040nr Example. Tax return 1040nr Mary bought a home on April 1, 1997. Tax return 1040nr She used it as her main home until August 31, 2000. Tax return 1040nr On September 1, 2000, she went on qualified official extended duty with the Navy. Tax return 1040nr She did not live in the house again before selling it on July 31, 2013. Tax return 1040nr Mary chooses to use the entire 10-year suspension period. Tax return 1040nr Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Tax return 1040nr During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Tax return 1040nr She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Tax return 1040nr Uniformed services. Tax return 1040nr   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Tax return 1040nr Foreign Service member. Tax return 1040nr   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Tax return 1040nr A Chief of mission. Tax return 1040nr An Ambassador at large. Tax return 1040nr A member of the Senior Foreign Service. Tax return 1040nr A Foreign Service officer. Tax return 1040nr Part of the Foreign Service personnel. Tax return 1040nr Employee of the intelligence community. Tax return 1040nr   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Tax return 1040nr The Office of the Director of National Intelligence. Tax return 1040nr The Central Intelligence Agency. Tax return 1040nr The National Security Agency. Tax return 1040nr The Defense Intelligence Agency. Tax return 1040nr The National Geospatial-Intelligence Agency. Tax return 1040nr The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Tax return 1040nr Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Tax return 1040nr The Bureau of Intelligence and Research of the Department of State. Tax return 1040nr Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Tax return 1040nr Qualified official extended duty. Tax return 1040nr   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Tax return 1040nr   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Tax return 1040nr Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Tax return 1040nr (But see Special rules for joint returns, next. Tax return 1040nr ) Special rules for joint returns. Tax return 1040nr   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Tax return 1040nr You are married and file a joint return for the year. Tax return 1040nr Either you or your spouse meets the ownership test. Tax return 1040nr Both you and your spouse meet the use test. Tax return 1040nr During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Tax return 1040nr If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Tax return 1040nr For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Tax return 1040nr Example 1—one spouse sells a home. Tax return 1040nr Emily sells her home in June 2013 for a gain of $300,000. Tax return 1040nr She marries Jamie later in the year. Tax return 1040nr She meets the ownership and use tests, but Jamie does not. Tax return 1040nr Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Tax return 1040nr The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Tax return 1040nr Example 2—each spouse sells a home. Tax return 1040nr The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Tax return 1040nr He meets the ownership and use tests on his home, but Emily does not. Tax return 1040nr Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Tax return 1040nr However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Tax return 1040nr Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Tax return 1040nr The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Tax return 1040nr Sale of main home by surviving spouse. Tax return 1040nr   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Tax return 1040nr   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Tax return 1040nr The sale or exchange took place after 2008. Tax return 1040nr The sale or exchange took place no more than 2 years after the date of death of your spouse. Tax return 1040nr You have not remarried. Tax return 1040nr You and your spouse met the use test at the time of your spouse's death. Tax return 1040nr You or your spouse met the ownership test at the time of your spouse's death. Tax return 1040nr Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Tax return 1040nr The ownership and use tests were described earlier. Tax return 1040nr Example. Tax return 1040nr Harry owned and used a house as his main home since 2009. Tax return 1040nr Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Tax return 1040nr Harry died on August 15, 2013, and Wilma inherited the property. Tax return 1040nr Wilma sold the property on September 1, 2013, at which time she had not remarried. Tax return 1040nr Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Tax return 1040nr Home transferred from spouse. Tax return 1040nr   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Tax return 1040nr Use of home after divorce. Tax return 1040nr   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Tax return 1040nr Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Tax return 1040nr This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Tax return 1040nr In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Tax return 1040nr A change in place of employment. Tax return 1040nr Health. Tax return 1040nr Unforeseen circumstances. Tax return 1040nr Qualified individual. Tax return 1040nr   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Tax return 1040nr You. Tax return 1040nr Your spouse. Tax return 1040nr A co-owner of the home. Tax return 1040nr A person whose main home is the same as yours. Tax return 1040nr Primary reason for sale. Tax return 1040nr   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Tax return 1040nr You qualify under a “safe harbor. Tax return 1040nr ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Tax return 1040nr Safe harbors corresponding to the reasons listed above are described later. Tax return 1040nr A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Tax return 1040nr  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Tax return 1040nr Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Tax return 1040nr Employment. Tax return 1040nr   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Tax return 1040nr It also includes the start or continuation of self-employment. Tax return 1040nr Distance safe harbor. Tax return 1040nr   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Tax return 1040nr Example. Tax return 1040nr Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Tax return 1040nr He got a job in North Carolina and sold his townhouse in 2013. Tax return 1040nr Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Tax return 1040nr Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Tax return 1040nr Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Tax return 1040nr The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Tax return 1040nr For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Tax return 1040nr Parent, grandparent, stepmother, stepfather. Tax return 1040nr Child, grandchild, stepchild, adopted child, eligible foster child. Tax return 1040nr Brother, sister, stepbrother, stepsister, half-brother, half-sister. Tax return 1040nr Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Tax return 1040nr Uncle, aunt, nephew, niece, or cousin. Tax return 1040nr Example. Tax return 1040nr In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Tax return 1040nr Lauren's father has a chronic disease and is unable to care for himself. Tax return 1040nr In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Tax return 1040nr Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Tax return 1040nr Doctor's recommendation safe harbor. Tax return 1040nr   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Tax return 1040nr Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Tax return 1040nr You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Tax return 1040nr Specific event safe harbors. Tax return 1040nr   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Tax return 1040nr An involuntary conversion of your home, such as when your home is destroyed or condemned. Tax return 1040nr Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Tax return 1040nr In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Tax return 1040nr An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Tax return 1040nr For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Tax return 1040nr Reasonable basic living expenses. Tax return 1040nr   Reasonable basic living expenses for your household include the following. Tax return 1040nr Amounts spent for food. Tax return 1040nr Amounts spent for clothing. Tax return 1040nr Housing and related expenses. Tax return 1040nr Medical expenses. Tax return 1040nr Transportation expenses. Tax return 1040nr Tax payments. Tax return 1040nr Court-ordered payments. Tax return 1040nr Expenses reasonably necessary to produce income. Tax return 1040nr   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Tax return 1040nr Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Tax return 1040nr Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Tax return 1040nr Exceptions. Tax return 1040nr   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Tax return 1040nr Calculation. Tax return 1040nr   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Tax return 1040nr   For examples of this calculation, see Business Use or Rental of Home , next. Tax return 1040nr Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Tax return 1040nr Example 1. Tax return 1040nr On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Tax return 1040nr She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Tax return 1040nr The house was rented from June 1, 2009, to March 31, 2011. Tax return 1040nr Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Tax return 1040nr Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Tax return 1040nr During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Tax return 1040nr Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Tax return 1040nr Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Tax return 1040nr Example 2. Tax return 1040nr William owned and used a house as his main home from 2007 through 2010. Tax return 1040nr On January 1, 2011, he moved to another state. Tax return 1040nr He rented his house from that date until April 30, 2013, when he sold it. Tax return 1040nr During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Tax return 1040nr Because it was rental property at the time of the sale, he must report the sale on Form 4797. Tax return 1040nr Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Tax return 1040nr Because he met the ownership and use tests, he can exclude gain up to $250,000. Tax return 1040nr However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Tax return 1040nr Depreciation after May 6, 1997. Tax return 1040nr   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Tax return 1040nr If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Tax return 1040nr Unrecaptured section 1250 gain. Tax return 1040nr   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Tax return 1040nr To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Tax return 1040nr Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Tax return 1040nr Worksheet 2. Tax return 1040nr Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Tax return 1040nr Gain or (Loss) on Sale       1. Tax return 1040nr   Selling price of home 1. Tax return 1040nr     2. Tax return 1040nr   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Tax return 1040nr     3. Tax return 1040nr   Subtract line 2 from line 1. Tax return 1040nr This is the amount realized 3. Tax return 1040nr     4. Tax return 1040nr   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Tax return 1040nr     5. Tax return 1040nr   Gain or (loss) on the sale. Tax return 1040nr Subtract line 4 from line 3. Tax return 1040nr If this is a loss, stop here 5. Tax return 1040nr 200,000   Part 2. Tax return 1040nr Exclusion and Taxable Gain       6. Tax return 1040nr   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Tax return 1040nr If none, enter -0- 6. Tax return 1040nr 10,000   7. Tax return 1040nr   Subtract line 6 from line 5. Tax return 1040nr If the result is less than zero, enter -0- 7. Tax return 1040nr 190,000   8. Tax return 1040nr   Aggregate number of days of nonqualified use after 2008. Tax return 1040nr If none, enter -0-. Tax return 1040nr  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Tax return 1040nr 668   9. Tax return 1040nr   Number of days taxpayer owned the property 9. Tax return 1040nr 2,080   10. Tax return 1040nr   Divide the amount on line 8 by the amount on line 9. Tax return 1040nr Enter the result as a decimal (rounded to at least 3 places). Tax return 1040nr But do not enter an amount greater than 1. Tax return 1040nr 00 10. Tax return 1040nr 0. Tax return 1040nr 321   11. Tax return 1040nr   Gain allocated to nonqualified use. Tax return 1040nr (Line 7 multiplied by line 10) 11. Tax return 1040nr 60,990   12. Tax return 1040nr   Gain eligible for exclusion. Tax return 1040nr Subtract line 11 from line 7 12. Tax return 1040nr 129,010   13. Tax return 1040nr   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Tax return 1040nr  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Tax return 1040nr If you do  not qualify to exclude gain, enter -0- 13. Tax return 1040nr 250,000   14. Tax return 1040nr   Exclusion. Tax return 1040nr Enter the smaller of line 12 or line 13 14. Tax return 1040nr 129,010   15. Tax return 1040nr   Taxable gain. Tax return 1040nr Subtract line 14 from line 5. Tax return 1040nr Report your taxable gain as described under Reporting the Sale . Tax return 1040nr If the amount on line 6 is more than zero, complete line 16 15. Tax return 1040nr 70,990   16. Tax return 1040nr   Enter the smaller of line 6 or line 15. Tax return 1040nr Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Tax return 1040nr 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Tax return 1040nr Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Tax return 1040nr In addition, you do not need to report the sale of the business or rental part on Form 4797. Tax return 1040nr This is true whether or not you were entitled to claim any depreciation. Tax return 1040nr However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Tax return 1040nr See Depreciation after May 6, 1997, earlier. Tax return 1040nr Example 1. Tax return 1040nr Ray sold his main home in 2013 at a $30,000 gain. Tax return 1040nr He has no gains or losses from the sale of property other than the gain from the sale of his home. Tax return 1040nr He meets the ownership and use tests to exclude the gain from his income. Tax return 1040nr However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Tax return 1040nr Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Tax return 1040nr In addition, he does not have to report any part of the gain on Form 4797. Tax return 1040nr Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Tax return 1040nr He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Tax return 1040nr Example 2. Tax return 1040nr The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Tax return 1040nr Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Tax return 1040nr Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Tax return 1040nr Examples are: A working farm on which your house was located, A duplex in w