Chapter 2
Rules for Sales in 2001

Use the rules in this chapter if you sold your main home in 2001.

You may be able to exclude any gain from income up to a limit of $250,000 ($500,000 on a joint return in most cases). If you can exclude all of the gain, you do not need to report the sale on your tax return.

If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040).

The main topics in this chapter are:

• How to figure gain or loss,
• Basis,
• Excluding the gain,
• Ownership and use tests,
• Special situations,
• Reporting the gain, and
• Real estate and transfer taxes.

This chapter includes worksheets you can use to figure your gain (or loss) and your exclusion. Use Worksheet 1 to figure the adjusted basis of the home you sold. Use Worksheet 2 to figure the gain (or loss), the exclusion, and the taxable gain (if any) on the sale. In some situations, you may also need to use Worksheet 3 to figure a reduced maximum exclusion.

How To Figure Gain or Loss

Basis

Excluding the Gain

Ownership and Use Tests

Special Situations

Reporting the Gain

Real Estate and Transfer Taxes