I apologize for a somewhat lengthy post. I am having issues with figuring and properly recording the sale. (I'm trying to use TaxACT)

Scenario:
House bought in 2006 and used as primary residence. Converted to rental in August 2012, due to job transfer.

I established FMV of home for tax purposes and 2012 taxes were filed and depreciation taken for house and appliances.

Due to non paying tenants, I went delinquent on mortgage. Bank agreed to deed-in-lieu of foreclosure. Process completed 12/26/2013. Received 1099-A from bank showing sales price as the remaining mortgage amount due. The FMV on the 1099-A was about $2000 higher than the sales price, so there is no issue with taxable cancelled debt.

I have completed the entries for income and expenses (Sch E), and depreciation (form 4562) for this tax year.

Now I am entering the information for form 4797, part III. I am entering information separately for house, land, and appliances. I am using the basis, depreciation allowed, and sales price from 1099-A.

Questions:

1. The appliances went with the house. Do I state the sales price was zero for their disposal? If not, how is it recorded?

2. How do I exempt the gain shown for the house and land (since it was primary residence)? The calculation on the 4797 shows the gain to be the depreciation + the amount of sale over the basis. I know I will have to pay taxes on the depreciation claimed for 2012 and 2013. I just can't figure out where to exempt the gain resulting from the sales price minus the basis.

I'm sure I will have more questions. Thanks in advance for any help.

-Bob