Tax Lesson 26 - Selling Your Home

1. Look at the Form 1040 you prepared for Karen Ortega. What is the amount on Form 1040, Line 13?

A. $ 9,727.
B. $ 12,157.
C. $ -0-. 
D. $ 1,642.

2. Look at the Form 1040 you prepared for Karen Ortega. What is the amount on Form 1040, Line 73a?

A. $ 229.
B. $ 221.
C. $ 492. 
D. $ 77.  

3. You may qualify to exclude from your income all or part of any gain from the sale of your main home. 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.

A. This choice can be made at any time before the expiration of a 3-year period beginning on the due date of return (not including extensions) for the year of sale.
B. This choice can be revoked at any time before the expiration of a 3-year period beginning on the due date of return (not including extensions) for the year of sale.
C. You can choose to exercise this option by filling out Form 2116 at the time of the due date of return for the year of sale. 
D. Both A and B above.

4. You can exclude up to $250,000 of the gain on the sale of your main home if

A. You meet the ownership test.
B. You meet the use test.
C. During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.
D. All of the above.

5. You should keep records to prove you home's adjusted basis. Ordinarily, you must keep records after the due date for filing you return for the tax year in which you sold your home. The record you should keep include

A. Proof of the home's purchase price and purchase expenses.
B. Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis.
C. 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. 
D. All of the above.

6. You can exclude up to $500,000 of the gain on the sale of your main home if

A. You are married and file a joint return for the year. 
B. Either you or your spouse meets the ownership test and both must meet the use test.
C. During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home.
D. All of the above.

7. Which of the following qualifies for exclusion from income of all or part of the gain from the sale of their main home in 2008?

A. You sold a personal residence January 1, 2007 and excluded all the gain. You sold another personal residence December 30, 2008. The reason for selling was not because of health problems or a change in employment or other special circumstances.
B. You owned and lived in your house from January 1, 2007 until February 15, 2008 and then sold it February 20, 2008. The sale was not due to health problems or a change of employment or other special circumstances.
C. Betty sells her house (that she had owned and lived in since 2007) in February 2008 and gets married one month later. Her husband had excluded the gain on the sale of his residence on his 2005 tax return. Betty had planned this wedding since 2004.
D. Mike and his wife moved in a brand new home February 2007. They got a divorced in December 2007 and his wife was allowed to live in the house until sold on July 15, 2008.

8. The required two years of having owned and lived in a principal residence within five years of the date of sale must be continuous to qualify for any part of the $500,000 exclusion.

True False

9. You owned and lived in your house from January 1, 2007 until February 15, 2008 and then sold it February 20, 2008. You can claim an exclusion (although reduced), if 

A. You had a change in employment.
B. You had health problems.
C. You had unforeseen circumstances.
D. Any of the above.

10. If 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

A. Do not need to allocate the gain on the sale of the property between the business part of the property and the part used as a home.
B. Do not need to report the sale of the business or rental part on Form 4797.
C. Cannot exclude the the part of any gain equal to any depreciation allowed after May 6, 1997.
D. You report the gain because the rental part of the property is part of your home.

11. Report gain on the sale or exchange of property held for personal use (such as your home) on Schedule D. Loss from the sale or exchange of property held for personal use is

A. Deductible.
B. Not deductible.
C. Also reported on Schedule D (Form 1040).
D. Reported on Schedule A (Form 1040).

12. 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.

True False

13. The sale of your main home is because of health if your primary reason for the sale is

A. To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual.
B. To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury.
C. To merely benefit a qualified individual's general health or well-being.
D. Either A or B above.

14. Unforeseen circumstances are considered to be the reason for selling your home if the following event occurred while you owned and used the property as your main home.

A. An involuntary conversion of your home, such as when your home is destroyed or condemned.
B. Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss in deductible.
C. Death, unemployment (if eligible for unemployment compensation) or a change in employment or self-employment status that results in an individual's inability to pay reasonable basic living expenses.
D. Any of the above.

15. If you sold your home that was acquired in a like-kind exchange, you cannot claim the exclusion if

A. You acquired your home in a like-kind exchange (section 1031 exchange) or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange.
B. You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange.
C. Both A and B above.
D. You defer gain from a like-kind exchange.

16. If the buyer paid your share of the taxes (or any delinquent taxes you owed), the payment decreases the selling price of your home.

True False

17. If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to pay back all or part of the benefit you received from that program when you sell or otherwise dispose of your home.

True False

18. Recapture of the federal mortgage subsidy applies if

A. Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home.
B. Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened.
C. The home is disposed of as a result of your death.
D. None of the above.

19. To exclude gain from the sale of your home, you generally 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. Usually, the home you live in most of the time is your main home and it can be

A. House, mobile home or apartment.
B. Houseboat.
C. Vacant land that is owned and used as part of your main home.
D. Any of the above.

20. You own a house, but you live in another house that your rent. Your main home is

A. The house that you own.
B. The rented house is your main home.
C. Neither the rented house nor the house that you rent.
D. None of the above.