Seller’s Obligation to Report the Sale of Real Estate to the IRS

Typically, the seller in a real estate transaction, including an exchange of any kind of property, must file an information return with the IRS. The sale or exchange of the seller’s principal residence is exempt from this reporting requirement if the following are all true:

1. Seller owned and used the property as his or her principal residence for at least two years during the five-year period immediately preceding the sale;

2. The Seller has not sold or exchanged another principal residence during the two-year period immediately preceding the sale;

3. No portion of the residence has been used for business or rental purposes by the seller or the seller’s spouse since May 6, 1997; and

4. At least one of the following is true:

• Sale or exchange is of the entire residence is for $250,000 or less;
• If the seller is married, the sale or exchange is of the entire residence for $500,000 or less and the gain is $250,00 or less; or
• If the seller is married, the sale or exchange is of the entire residence for $500,000 or less, the seller intends to file a joint return for the return and requirements 1 and 2 above apply to the seller’s spouse.

Do you need more information? Please call one of our central Illinois office locations to schedule an appointment with one of our real estate lawyers today. You may also contact us online if you prefer.