Spidell Seminar (experts on CA taxes) last week had a
question of this very subject. About 90% of the
participants, including the speaker, use a Sch D entry to
protect the client. The FTB is notorious for demanding
taxes on a sale that hasn't been reported - and some two
years after the year of sale.

Nan, EA in LA

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D. Stussy wrote:

- quote -

Sorry, but the two items are not the same thing. Ignore at
your own peril as they say. see below.

- quote -

Right, matching may not occur during processing, so there
are two schools of thought on what to do.

1. on a separate statement report the fact that the 1099-s
has been received and is clearly in error. In this case
when the 1099-s"hit" s the fan, somebody somewhere somehow
must look at the whole file.

2. "report" the sale amount on schedule D but also report
cost as the same amount, thus zeroing it out. Thus no CPC
2000 is generated, or shouldn't be, and everybody is/should
be happy.

I usually take # 1 as my way of doing it. Never had a
problem yet, no matter whether a 1099-S, a 1099-misc, or any
other 1099.

That's about all I can say on the subject.

Cheer$,
(been there, done that) (and will probably do it again! lol)
Harlan Lunsford, EA n LA

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< shortened by the moderator
- quote -

In this context, "ignore" and "do not report" mean the same
thing (to me) because they both have the same outcome: It
will NOT be listed on Schedule D.

- quote -

1099/IRP matching does not occur during processing, so that
point is moot. I think that the worse case will simply be a
CP-2000 notice coming out, and with a response of "the
1099-S was in error for it was for my past primary residence
for which I get an exclusion," the issue should die there.

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Why not report it? Is the IRS going to penalize us for
doing so? Or the taxpayer? Clearly the broker made an error
and we're covering it..Personally, I am not going to subject
MY clients to IRS CP 2000s or an FTB letter a year or two
down the road. That's heart attack territory for some
clients!

Nan, EA in LA

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Arthur L. Rubin wrote:
- quote -

True, but they do use BOLD print for "do not" regarding the
reporting of a sale of residence and normal print for "for
which you received a Form 1099-S." I think that makes it
clear which takes precedence, at least in the IRS's "mind:"

Do NOT report a sale of [principal] residence less than the
exclusion even if a 1099-S was issued.

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"Arthur L. Rubin" <ronnirubin[at]sprintmail.com> wrote:
- quote -

I always report it because in many cases there is an effect
on the state income tax return. For example the Michigan
homestead credit has a different defination of "household
income" vs "taxable income". While the gain is not taxable
it is household income as is life insurance proceeds,
disability insurance proceeds, etc.

In most cases this eliminates the Michigan homestead credit.

Regards,

Mark

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D. Stussy wrote:
- quote -

For the life of me, I just can't find that word "ignore"
where you say it is. It says "do not report....." But
if you have a 1099 form, you ignore it at your own peril.

IRS when writing instructions plans on everybody doing the
right thing, and in this case, planning on brokers not to
make out a 1099-S when (clearly) not needed.

So here's what I do when faced with this stray 1099-S. I
"report" the receipt of it on a separate statement attached
to the return. This covers my client.

- quote -

Can you imagine some clerk processing the return having
access to previous years' tax returns without having to put
it aside and bucking it up to her superior? In an ideal
world, maybe. Besides, some people do use a PO Box, and
still others, like myself, use their office address on their
1040's.

Happy New Cheer$,
Harlan Lunsford, EA n LA

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D. Stussy wrote:

- quote -

IRS instructions also say to report all transactions
reported to you on 1099-B and 1099-S forms on schedule D.

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Herb Smith wrote:
- quote -

I disagree with ALL 3 POSTS that say to put it on Schedule
D. The IRS's instructions say to IGNORE the form if it's
issued for your personal residence, "unless your gain
exceeds your exclusion amount" (Sch D Instr - page 1, col 3,
at the very bottom).

If the IRS can't figure out that this was your principal
residence by the fact that your past few years' returns
listed that as your address, ... your response is up to you
- but "Angels and Christmas Trees come to mind here." :-)

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- quote -

Explaining it might be tricky but what she needs to do is
just file it away with her tax return for the year.

And to try to explain it, it just shows what she received as
the selling price of the real estate.

Carol
What can one expect of a day that begins with getting out of bed.

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"chaz" <chaznsc[at]yahoo.com> wrote:

- quote -

The form was probably issued in error by the escrow agent,
who may not have known that this was her personal residence
(it happens). She can report the sale and exclusion by
entering the sale on Line 8 of her Schedule D (using the
1099S proceeds, her cost basis, and calculated gain), then
on the next line, write "Section 121 exclusion" and enter
the amount of gain (column e) as a negative number. The two
lines cancel out and there is no tax due.

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The gross sale price was reported. I think most of us would
play it safe and use Schedule D to report $93,600 received
and a "basis" of $93,600 with Sec 121 added in explanation.

In other words, she isn't taxable on it but having that
amount of income waving in the breeze should be explained.

Nan, EA in LA

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chaz <chaznsc[at]yahoo.com> wrote:

- quote -

The title agent or selling attorney should have made sure
she checked the box used for the HUD-1 which says she owned
it and lived there as her main home at least 2 of the past 5
years, then there should not have been any Form 1099-S
issued.

On another newsgroup, you hinted the opriginal Red Copy
might have been given to you and not sent to the IRS, which
means it's a safe bet you can ignore it.

Otherwise, my method for handling this is to report the sale
or personal residence on the long term section of schedule
D, record the sales price and adjusted cost basis, and enter
a gain.

On the next line of schedule D write

"Sec 121 exclusion amount" and in the gain/loss column,
enter as a negative amount the same gain shown on the sale
of house line.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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My friend just sold her home and moved into an apartment.
She made about 7000 dollars from the sale which I understand
is NOT taxable (?). She received a form however during the
closing that states the PROCEEDS from the sale were 93,600,
which was the sale amount of the home.

Can someone explain this form to us and what we need to do
as far as taxes?

This was the home she lived in up until it sold, she was
there about 10 years.

chaz

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