Question

If you sold your home and there was a 1099-S, what tax form does that go on and where? Would there be a capital gain or an ordinary gain on your home if there was one?

Answer 1

Specific Instructions

File Form 1099-S, Proceeds From Real Estate Transactions, to report the sale or exchange of real estate.

Reportable Real Estate

Generally, you are required to report a transaction that consists in whole or in part of the sale or exchange for money, indebtedness, property, or services of any present or future ownership interest in any of the following.

Improved or unimproved land, including air space.

Inherently permanent structures, including any residential, commercial, or industrial building.

A condominium unit and its appurtenant fixtures and common elements, including land.

Stock in a cooperative housing corporation (as defined in section 216).

Any non-contingent interest in standing timber.

Sale or exchange. A sale or exchange includes any transaction properly treated as a sale or exchange for federal income tax purposes, even if the transaction is not currently taxable. For example, a sale of a main home may be a reportable sale even though the transferor may be entitled to exclude the gain under section 121 of gain under section 351 is a reportable exchange. In addition, a transfer under a land contract is reportable in the year in which the parties enter into the contract.

Ownership interest. An ownership interest includes fee simple interests, life estates, reversions, remainders, and perpetual easements. It also includes any previously created rights to possession or use for all or part of any particular year (for example, a leasehold, easement, or timeshare), if such rights have a remaining term of at least 30 years, including any period for which the holder may renew such rights, determined on the date of closing. For example, a preexisting leasehold on a building with an original term of 99 years and a remaining term of 35 years on the closing date is an ownership interest; however, if the remaining term is 10 years, it is not an ownership interest. An ownership interest does not include any option to acquire real estate. An ownership interest also includes any contractual interest in a sale or exchange of standing timber for a lump-sum payment that is fixed and not contingent

Involuntary conversion. A sale of real estate under threat or imminence of seizure, requisition, or condemnation is generally a reportable transaction.

Timber. Report on Form 1099-S payments of timber royalties made under a pay-as-cut contract, reportable under section 6050N. For more information, see Announcement 90-129, 1990-48 I.R.B. 10.

Exceptions

The following is a list of transactions that are not reportable; however, you may choose to report them. If you do, you are subject to the rules in these instructions.

Sale or exchange of a residence (including stock in a cooperative housing corporation) for $250,000 or less if you received an acceptable written assurance (certification) from the seller that such residence is the principal residence (within the meaning of section 121) of the seller and the full amount of the gain on such sale is excludable from gross income under section 121. If the certification includes an assurance that the seller is married, the preceding sentence shall be applied by substituting “$500,000” for “$250,000.” If there are joint sellers, you must obtain a certification from each seller (whether married or not) or file Form 1099-S for any seller who does not make the certification. The certification must be signed by each seller.

Who Must File

Generally, the person responsible for closing the transaction, as explained in (1) below, is required to file Form 1099-S. If no one is responsible for closing the transaction, the person required to file Form 1099-S is explained in (2), later. However, you may designate the person required to file Form 1099-S in a written agreemen

1. If you are the person responsible for closing the transaction, you must file Form 1099-S. If a Settlement Statement (HUD-1) prescribed under the Real Estate Settlement Procedures Act of 1974 (RESPA) is used and a person is listed as the settlement agent on the statement, the person responsible for closing the transaction is the person listed as the settlement agent on that statement. A HUD-1 includes any amendments, variations, or substitutions that may be prescribed under RESPA if any such form requires disclosure of the transferor and transferee, the application of the proceeds, and the identity of the settlement agent or other person responsible for preparing the form.

   If a HUD-1 is not used, or no settlement agent is listed, the person responsible for closing the transaction is the person who prepares the closing statement, including a settlement statement (including a HUD-1) or other written document that identifies the transferor and transferee, reasonably identifies the real estate transferred, and that describes how the proceeds are to be or were disbursed.

   If no closing statement is used, or if two or more statements are used, the person responsible for closing the transaction is, in the following order. The transferee's attorney who is present at the delivery of either the transferee's note or a significant part of the cash proceeds to the transferor or who prepares or reviews the preparation of the documents transferring legal or equitable ownershipThe transferor's attorney who is present at the delivery of either the transferee's note or a significant part of the cash proceeds to the transferor or who prepares or reviews the preparation of the documents transferring legal or equitable ownershipThe disbursing title or escrow company that is most significant in disbursing gross proceed If there is more than one attorney described in (a) or (b), the one whose involvement is most significant is the person considered responsible for closing the transaction. If no one is responsible for closing the transaction as explained in (1) above, the person responsible for filing is, in the following order: (a) the mortgage lender, (b) the transferor's broker, (c) the transferee's broker, or (d) the transferee. For purposes of (2) above, apply the following definitions.Mortgage lender means a person who lends new funds in connection with the transaction, but only if the loan is at least partially secured by the real estate. If there is more than one lender, the one who lends the most new funds is the mortgage lender. If several lenders advance equal amounts of new funds, and no other person advances a greater amount of new funds, the mortgage lender is the one who has the security interest that is most senior in priority. Amounts advanced by the transferor are not treated as new funds.Transferor's broker means the broker who contracts with the transferor and who is compensated for the transaction.Transferee's broker means the broker who significantly participates in the preparation of the offer to acquire the property or who presents such offer to the transferor. If there is more than one such person, the transferee's broker is the one who most significantly participates in the preparation of the acquisition offer. If there is no such person, the one who most significantly participates in the presentation of the offer is the transferee's broker.Transferee means the person who acquires the greatest interest in the property. If no one acquires the greatest interest Statements to Transferors

   1. If you are required to file Form 1099-S, you must furnish a statement to the transferor. Furnish a copy of Form 1099-S or an acceptable substitute statement to each transferor. For more information about the requirement to furnish a statement to the transferor, see part M in the 2018 General Instructions for Certain Information Returns.

      Buyer's Part of Real Estate Tax

      For a real estate transaction involving a residence, enter the real estate tax paid in advance that is allocable to the buyer. You do not have to report an amount as allocable to the buyer for real estate taxes paid in arrears. You may use the appropriate information included on the HUD-1, or comparable form, provided at closing. For example, a residence is sold in a county where the real estate tax is paid annually in advance. The seller paid real estate taxes of $1,200 for the year in which the sale took place. The sale occurred at the end of the 9th month of the real estate tax year. Therefore, $300 of the tax paid in advance is allocated to the buyer, by reference to the amount of real estate tax shown on the HUD-1 as paid by the seller in advance, and is reported in box 5. See Notice 93-4, 1993-1 C.B. 295.

      Would there be a capital gain or an ordinary gain on your home if there was one?

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      “In general, to qualify for the exclusion, you must meet both the ownership test and the use test. You're eligible for the Section 121 exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

      One of the benefits of owning real estate is the ability to sell it at a profit. When you buy real estate at one price and later sell it for a higher price, the profit you realize is called a capital gain. In many instances, the capital gains on real estate are also taxable. Generally, you're responsible for reporting to the Internal Revenue Service and applicable states, such as California, capital gains realized from real estate sales.

      You report all capital gains on the sale of real estate on Schedule D of IRS Form 1040, the annual tax return. The IRS treats home sales a bit differently than most other assets generating capital gains, though. If you sell your home and realize a capital gain, up to $500,000 of that gain may be exempted from taxation. However, the IRS has no exemptions for capital gains realized from the sale of investment real estate.

      If you can exclude the entire capital gain realized from the sale of your home, you don't need to report it to the IRS. If you receive a 1099-S after selling your home, you must report that sale even if the capital gain can be excluded. You also must report the sale of your home to the IRS if you can't exclude the entire capital gains amount. The IRS partly relies on the honor system when taxes are filed but treats cheaters harshly.

      Failing to report, either deliberately or inadvertently, capital gains you realized during the reporting tax year may put you in jeopardy of IRS sanction. The IRS can and frequently does impose monetary fines and penalties for failing to report all income and capital gains earned or realized. Criminal penalties may also apply in cases in which the IRS proves fraud or tax evasion in hiding capital gains. California and other states also monitor capital gains resulting from real estate sales.