Adjustments To Basis In TaxSlayer - IRS Tax Forms

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Adjustments to Basis in TaxSlayerEnter Capital Gain/Loss Transactions in TaxSlayerFor most transactions, you do not need to adjust the basis. You may need to adjust the basis if you received a Form1099-B or 1099-S (or substitute statement) that is incorrect, are excluding or postponing a capital gain, have adisallowed loss, or certain other situations. Details are in the table below.In Scope TransactionsSelect from thedropdown listIF THEN You received a Form 1099-B(or substitute statement)and the basis shown in box3 is incorrect If the basis was not reportedto the IRS, report thecorrect basis and make noadjustment. If the basis wasreported to the IRS Form 1099-B with Basisin Box 3 is Incorrect &Correct Basis is Loweror HigherYou received a Form 1099B or 1099-S (or substitutestatement) and there areselling expenses that arenot reflected on the form orschedule Enter the proceeds asreported in Box 1d. Enteras an adjustment using aminus sign for any sellingexpenses that you paid (andthat are not reflected onthe form or statement youreceived).Form 1099-B with Basisin Box 3 is Incorrect &Correct Basis is Loweror HigherYou sold or exchanged yourmain home at a gain, mustreport the sale or exchangeand can exclude some or allof the gain Report the sale or exchange Exclude Some/All of theas you would if were notGain from the Sale oftaking the exclusion.Your Main HomeThen enter the amount ofexcluded (nontaxable) gainas a negative number.You have a nondeductibleloss other than a lossindicated by code W Report the sale or exchangeand enter the amount ofthe nondeductible lossas an adjustment. SeeNondeductible Losses in theInstructions for Schedule D.Nondeductible lossother than a WashSale*You report multipletransactions on a single rowas described in Exception toReporting each Transactionon a Separate Row Enter -0- as the adjustmentamount unless anadjustment is requiredbecause of another code.Reporting MultipleTransactions on aSingle RowYou received a Form 1099-B(or substitute statement)and the type of gain orloss (short term or longterm) shown in box 1c isincorrect) Enter transaction withcorrect term (long orshort). Enter -0- as theadjustment amount unlessan adjustment is requiredbecause of another code.Form 1099-B and Typeof Gain/Loss indicatedin Box 2 is incorrectYou have a nondeductibleloss from a wash sale* Report the sale or exchange Nondeductible loss fromand enter the amount of the a Wash Sale*nondeductible loss as anadjustment.You have an adjustmentnot explained earlier in thiscolumn Report the appropriateadjustment amount.D-26See Tab R, Glossaryand Index, for thedefinition of wash sale.Other adjustmentAdjustment Code that willappear on Form 8949BEHLMTWO

Adjustments to Basis in TaxSlayer (continued)Out of Scope Transactions:IF Adjustment CodeYou received a Form 1099-B or 1099-S (or substitutestatement) as a nominee for the actual owner of theproperty.NYou sold or exchanged qualified small business stock andcan exclude part of the gain.QYou can exclude all or part of your gain under the rulesexplained in the Schedule D instructions for DC Zoneassets or qualified community assets.XYou are electing to postpone all or part of your gain underthe rules explained in the Schedule D instructions for anyrollover of gain (for example, rollover of gain from QSBstock or publicly traded securities).RYou had a loss from the sale, exchange, or worthlessnessof small business (section 1244) stock and the total loss ismore than the maximum amount that can be treated as anordinary loss.SYou disposed of collectibles (see the Schedule Dinstructions).C* Wash sales are in scope only if reported on Form 1099-B or on a brokerage or mutual fund statement.D-27

Capital Gains or Losses Sale of Main HomeThe sale or exchange of a main home must be reported as a Capital Gain or Loss if: The taxpayer can’t exclude all of their gain from income,The taxpayer has a gain and chooses not to exclude it, orThe taxpayer received a Form 1099-S for the sale or exchange.Note: The taxpayer does not have to report the sale of their main home if they qualify and choose to exclude all of theirgain and did not receive Form 1099-S. See Tab R, Glossary and Index, for a definition of main home.Generally, if the following two tests below are met, the taxpayer can exclude up to 250,000 of gain. If both the taxpayerand their spouse meet these tests and file a joint return, they can exclude up to 500,000 of gain (but only one spouseneeds to meet the ownership requirement in Test 1). Reduced exclusions are Out of Scope. Test 1. During the 5-year period ending on the date the taxpayer sold or exchanged their home, they owned itfor 2 years or more (the ownership requirement) and lived in it as their main home for 2 years or more (the userequirement).Note: Military members may be able to suspend the 5-year period while serving on qualified official extended duty. Test 2. The taxpayer hasn’t excluded gain on the sale or exchange of another main home during the 2-year periodending on the date of the sale or exchange of their home.If the taxpayer has a gain that can’t be excluded, it is taxable.Note: Sale of a home received through inheritance or as a gift is Out of Scope unless it has been used as a personalresidence by the taxpayer or spouse. The taxpayer must provide the cost basis of the residence. Tests 1 and 2 then applyto exclude the gain.Death of spouse. If the taxpayer sells their home within 2 years after their spouse dies and has not remarried as of thesale date, they can count any time their spouse owned the home as time they owned it and any time when the home wastheir spouse’s residence as time when it was their residence. In addition, the taxpayer may be able to increase their exclusion amount from 250,000 to 500,000 if the taxpayer or their deceased spouse meet the requirements for Test 1 andboth the taxpayer and their deceased spouse meet the requirement for Test 2.If the taxpayer is required to report thesale and it results in a gain, enter thepurchase date, sale date, purchaseprice, and sales price in the Sale ofHome Worksheet (you will enter capitalimprovements and other adjustments tobasis on the next screen).Out of scopeOut of scopeD-28

Capital Gains or Losses Sale of Main Home(continued)Enter the number of days the dwellingwas used as the main home (separateentry for spouse).If the taxpayer received the 2008First-Time Homebuyers Credit, selectthe box. Form 5405, Repayment of theFirst-Time Homebuyer Credit, will berequired to determine how much of thecredit must be repaid.Enter the number of days thetaxpayer owned the home(separate entry for spouse).If the taxpayer meets the ownership, residence,and look-back requirements, taking the exceptionsinto account, then the Eligibility Test is met and thetaxpayer is eligible for the Maximum Exclusion,select the box (reduced maximum exclusion is Outof Scope; refer to a professional). The HUD-1 Settlement Statement will givedetails about closing costs. If the sale must be reported and resultsin a gain, it will be listed on the appropriateForm 8949 (basis type C or F). The gain willbe included with the other capital gains andlosses on Schedule D. Enter the fees from the purchase of thehome that weren’t included in the purchaseprice already entered.D-29

Capital Gains or Losses Sale of Main Home(continued) Enter the selling expenses, cost ofimprovements and other increases or decreasesto the basis of the home. See Publication 523,Selling Your Home, for more information aboutbasis. This will calculate the adjusted basis of thehome, which will be shown on Form 8949. The information will carry to Form 8949 andSchedule D. If you’ve checked the box to exclude the entiregain, Form 8949 will show the adjustment as anegative number in the amount of the net gain,with adjustment code H and basis type F and nonet gain/loss.Example: The taxpayer received a Form 1099-S for the sale of their main home. The taxpayer’s adjusted basis in thehome is 150,000. The proceeds from the sale is 200,000. The taxpayer meets the ownership and use tests. The taxpayer’s Form 8949 is shown below.If the sale resulted in a gain but was noteligible for the exclusion, it will be reportedon the appropriate Form 8949 as a gain.D-30

Capital Gains or Losses Sale of Main Home(continued)If the sale is a loss but must be reported because Form 1099-S was received:Loss on the sale of a main home can’t be deducted. To report the sale, you must enter the sale as a capital gain or lossitem: You can use the Sale of Main Home worksheet to assist you in determining the basis, but the information will NOTcarry to Form 8949 Add a new Capital Gain or Loss Item Enter the dates, sales price and adjusted basis amount The basis type will be “Did not receive Form 1099-B” Enter an adjustment in the amount of the loss as a positive numberSelect the adjustment reason as“nondeductible loss other than a wash sale”which will show as adjustment code L.D-31

Capital Gains or Losses Sale of Main Home (continued) If the sale is a loss but must be reported because Form 1099-S was received: Loss on the sale of a main home can't be deducted. To report the sale, you must enter the sale as a capital gain or loss item: You can use the Sale of Main Home worksheet to assist you in determining the basis .

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