Am I missing something here? This is a sale of a simple main residence.

We sold our old house for $131500 and had an adjusted basis of $141000. Selling expenses were around $9000 so we have realized proceeds of $131500 - $9000 = $122500. Based on basis that gives me a loss of $18500. On Schedule D I have to add back the loss as a non deductible loss so I end up with a gain ($131500 sale - $141000 basis + $18500 adjustment to gain/loss = $9000)?

Maybe I'm just looking for logic here (hahaha). Is the logic that I'll only be taxed at 15% for this portion of my income rather than at a higher rate based on the later portions of Schedule D, or am I really messing something up?

“My understanding is that the loss is determined from amount realized less adjusted basis, thus the $18500 nondeductible loss figure I had going into column g. I can't find anything in the instructions that state to do what you're telling me to do.”--->Sorry it was mybad;correct. the house was not an income producing property. Most of the time you owned it, you lived in it or were trying to sell it. It was not held as an investment. You cannot deduct a loss on the sale of the house.Howevr, you can deduct mortgage interest and real estate taxes on both houses for the parts of the year you owned them, assuming the total mortgages were less than $1 million. If the combined mortgages were more than $1 million, your deduction is going to be reduced to the interest on $1 million

“Because the loss is nondeductible, enter ‘‘L’’ in column (b). Enter the amount of the nondeductible loss as a positive number in column (g).”--->Correct; in certain situations, you must put a code, code L( since you have a nondeductible loss other than code W loss, in column (b) of Form 8949 and report the difference between column (e) and column (f) adjustment to your loss,($18,500) as a positive amount in column (g), then go to Sch D. For example, if you entered $31,500 in column (e) and $50,000 in column (f), enter $18, 500 in column (g).
“My understanding is that the loss is determined from amount realized less adjusted basis, thus the $18500 nondeductible loss figure I had going into column g. I can't find anything in the instructions that state to do what you're telling me to do.”--->Correct. You may need to complete columns (b) and (g) as you have a disallowed loss. You can not claim a loss on the sale of a personal residence.

“OK buried deep in the 1040 Schedule D Instructions, it tells me add back in those additional costs of sale and also to put an O in column b.”--->You need to Include in this column any selling expense such as broker’s fees, commissions unless you reported the net sales price in column (e). If you include any expenses in (e) ,then , you need to enter O in column b.

Publication 523 states

If you have a loss on the sale of your main home for which you received a Form 1099-S, you must report the sale on Form 8949 even though the loss is not deductible.

Because the loss is nondeductible, enter ‘‘L’’ in column (b). Enter the amount of the nondeductible loss as a positive number in column (g).


My understanding is that the loss is determined from amount realized less adjusted basis, thus the $18500 nondeductible loss figure I had going into column g. I can't find anything in the instructions that state to do what you're telling me to do.

EDIT:

OK buried deep in the 1040 Schedule D Instructions, it tells me add back in those additional costs of sale and also to put an O in column b. Thanks.