• 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.

1. Your place of employment.
2. The location of your family members' main home.
3. Your mailing address for bills and correspondence.
4. The address listed on your:
   1. Federal and state tax returns,
   2. Driver's license,
   3. Car registration, and
   4. Voter registration card.
5. The location of the banks you use.
6. The location of recreational clubs and religious organizations of which you are a member.

The selling price is the total amount you receive for your home. It includes money; all notes, mortgages, or other debts assumed by the buyer as part of the sale; and the fair market value of any other property or services you receive.

Personal property.   The selling price of your home does not include amounts you received for personal property sold with your home. Personal property is property that is not a permanent part of the home. Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Any gains from sales of personal property must be included in your income, but not as part of the sale of your home.

Payment by employer.   You may have to sell your home because of a job transfer. 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. 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.

Option to buy.   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. If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Report this amount on Form 1040, line 21, or on Form 1040NR, line 21.

Form 1099-S.   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (gross proceeds) should show the total amount you received for your home.   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. Instead, box 4 will be checked to indicate your receipt or expected receipt of these items.   If you can exclude the entire gain, the person responsible for closing the sale generally will not have to report it on Form 1099-S. If you do not receive Form 1099-S, use sale documents and other records to figure the total amount you received for your home.

The amount realized is the selling price minus selling expenses.

Selling expenses.   Selling expenses include:

While you owned your home, you may have made adjustments (increases or decreases) to the basis. This adjusted basis must be determined before you can figure gain or loss on the sale of your home. For information on how to figure your home's adjusted basis, see Determining Basis , later.

To figure the amount of gain or loss, compare the amount realized to the adjusted basis.

Gain on sale.   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.

Loss on sale.   If the amount realized is less than the adjusted basis, the difference is a loss. A loss on the sale of your main home cannot be deducted.

Jointly owned home.   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer.

Separate returns.   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Your ownership interest is determined by state law.

Joint owners not married.   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. Each of you applies the rules discussed in this publication on an individual basis.

Some special rules apply to other dispositions of your main home.

Foreclosure or repossession.   If your home was foreclosed on or repossessed, you have a disposition.   You figure the gain or loss from the disposition in generally the same way as gain or loss from a sale. But the selling price of your home used to figure the amount of your gain or loss depends, in part, on whether you were personally liable for repaying the debt secured by the home, as shown in the following chart.

IF you were...	THEN your selling price includes...
not personally liable for the debt	the full amount of debt canceled by the foreclosure or repossession.
personally liable for the debt	the amount of canceled debt up to the home's fair market value. You may also have ordinary income, as explained next.

Ordinary income.   If you were personally liable for the canceled debt, you may have ordinary income in addition to any gain or loss. If the canceled debt is more than the home's fair market value, you have ordinary income equal to the difference. Report that income on Form 1040, line 21, or on Form 1040NR, line 21. However, the income from cancellation of debt is not taxed to you if the cancellation is intended as a gift, a discharge of qualified principal residence indebtedness, or if you are insolvent or bankrupt. For more information on insolvency or bankruptcy, see Publication 908, Bankruptcy Tax Guide. For the definition of qualified principal residence indebtedness and more information on discharges of that indebtedness, see Discharges of qualified principal residence indebtedness , later under Decreases to Basis. Also see Form 982 and Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Form 1099-A and Form 1099-C.   Generally, you will receive Form 1099-A, Acquisition or Abandonment of Secured Property, from your lender if your home is transferred in a foreclosure. This form will have the information you need to determine the amount of your gain or loss and any ordinary income from cancellation of debt that is not a discharge of qualified principal residence indebtedness. If your debt is canceled, you may receive Form 1099-C, Cancellation of Debt.

More information.   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. Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession.

Abandonment.   If you abandon your home, you may have ordinary income. If the abandoned home secures a debt for which you are personally liable and the debt is canceled, you have ordinary income equal to the amount of canceled debt (but see Exception , below).   If the home is secured by a loan and the lender knows the home has been abandoned, the lender should send you Form 1099-A or Form 1099-C. See Form 1099-A and Form 1099-C , above, for information about those forms. If the home is later foreclosed on or repossessed, gain or loss is figured as explained in that discussion.

Exception.   If the debt canceled is qualified principal residence indebtedness, other rules apply. See Discharges of qualified principal residence indebtedness under Decreases to Basis, later.

Trading (exchanging) homes.   If you trade your old home for another home, treat the trade as a sale and a purchase.

Transfer to spouse.   If you transfer your home to your spouse or to your former spouse incident to your divorce, you generally have no gain or loss (unless the Exception, discussed next, applies). This is true even if you receive cash or other consideration for the home. Therefore, the rules explained in this publication do not apply.   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. You have no gain or loss.

Exception.   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. In that case, you generally will have a gain or loss.

More information.    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information.

Involuntary conversion.   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. 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 ).

The cost of property is the amount you pay for it in cash, debt obligations, other property, or services.

Purchase.   If you buy your home, your basis is its cost to you. This includes the purchase price and certain settlement or closing costs. Generally, 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. If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later.

Seller-paid points.   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.   

Settlement fees or closing costs.   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 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. 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).   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance.   Some of the settlement fees or closing costs that you can include in your basis are:   Some settlement fees and closing costs you cannot include in your basis are:

Real estate taxes.   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart.   

Construction.   If you contracted to have your house built on land you own, your basis is:   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. It also includes certain settlement or closing costs. You may have to reduce your basis by points the seller paid for you. For more information, see Seller-paid points and Settlement fees or closing costs, earlier.

Built by you.   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Do not include in the cost of the house:

Temporary housing.   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. To figure the amount of the reduction, multiply the contract price by a fraction. 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.

Cooperative apartment.   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. This may include your share of a mortgage on the apartment building.

Condominium.   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home.

You must use a basis other than cost, such as fair market value, if you received your home from your spouse, as a gift or inheritance, or in a trade. These situations are discussed on the following pages. Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues.

Fair market value.   Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property.

Home received as gift.   Use the following chart to find the basis of a home you received as a gift.

Part of federal gift tax due to net increase in value.   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. 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. The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift.

Home received as inheritance.   If you inherited your home, your basis is its fair market value on the date of the decedent's death or the later alternate valuation date if that date was chosen by the personal representative for the estate. If an estate tax return was filed, the value listed for the property generally is your basis. 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.

Surviving spouse.   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. The new basis for the half interest that your spouse owned will be one-half of the fair market value on the date of death (or alternate valuation date). The basis in your half will remain one-half of the adjusted basis determined previously. Your new basis in the home is the total of these two amounts.

Community property.   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. When either spouse dies, the total fair market value of the community property generally becomes the basis of the entire property, including the part belonging to the surviving spouse. 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.   For more information about community property, see Publication 555, Community Property.

Note.   At the time this publication went to print, these basis rules for inherited property will no longer apply with respect to decedents dying after December 31, 2009.

Home received as trade.   If you acquired your home as a trade for other property, the basis of your home is generally the fair market value (at the time of the trade) of the property you gave up. If you traded one home for another, you have made a sale and purchase. In that case, you may have a gain. See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain.

Home received from spouse.   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.

Transfers after July 18, 1984.   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Your basis in this home is generally the same as your spouse's (or former spouse's) adjusted basis just before you received it. 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.   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, your basis in the half interest received from your spouse is generally the same as your spouse's adjusted basis just before the transfer. This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Your basis in the half interest you already owned does not change. Your new basis in the home is the total of these two amounts.

Transfers before July 19, 1984.   If you received your home before July 19, 1984, in exchange for your release of marital rights, your basis in the home is generally its fair market value at the time you received it.

More information.   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504.

Involuntary conversion.   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. 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:

More information.   For more information about basis, see Publication 551.

Adjusted basis is your cost or other basis increased or decreased by certain amounts.

To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Filled-in examples of that worksheet are included in Comprehensive Examples , later.

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 that you filed to exclude any discharge of qualified principal residence indebtedness,
• Any Form 2119, Sale of Your Home, that 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.

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.

• You meet the ownership test.
• You meet the use test.
• During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

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.

You may be able to exclude up to $500,000 of the gain 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 .

To claim the exclusion, you must meet the ownership and use tests. 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).

Exception.   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. However, the maximum amount you may be able to exclude will be reduced. See Reduced Maximum Exclusion , later.