Reporting sale of Duplex

7 Replies

I purchased a duplex Jan 2015 to live in and update. In October 2017 I sold the duplex. I ended up putting close to 40,000 in updates and repairs. I did not report the sale of the duplex on my taxes because I didn’t receive a 1099s and I believed because I lived in the house for greater than 2 years I’d be exempt from gains. I received a CP2501 stating I needed to report the sale of real estate. I am now not sure how to reply to this notice... do I write/ type up letter and mail it in with my response to the CP2501 then amend my tax return. Any advise is greatly appreciated.

Ya you still need to report taxable events on your taxes.

Even if it won't generate tax- the IRS doesn't know that unless you provide them with all of that information. 

Did you only occupy 1/2 of the duplex and rent 1/2? If so- only 50% of your gain was tax free. 


The notice should list instructions on how to respond. If you're not sure how to handle it I would retain a tax professional to take care of this for you. 

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@Natalie Kolodij

After the renovations I did rent out one side of the duplex on Airbnb. The notice seems vague on what I need to send in other that I agree or don’t agree. It says proof of your cost adjusted basis in the property and a statement of how I used the property and refer to Publication 523. By asking for a statement am I to write a letter saying it was my residence? Or that isn’t going to help?

@Eamonn McElroy

I spent about a year renovating one unit while living in the other. Then moved into the other side renovating the side I lived in before. After that I rented it out on Airbnb.

Originally posted by @Will Dee:

@Natalie Kolodij

After the renovations I did rent out one side of the duplex on Airbnb. The notice seems vague on what I need to send in other that I agree or don’t agree. It says proof of your cost adjusted basis in the property and a statement of how I used the property and refer to Publication 523. By asking for a statement am I to write a letter saying it was my residence? Or that isn’t going to help?

It wasn't 100% your residence. 

It was 50% your residence, and 50%  a business asset that should have been reported each year, depreciated, and made 50% of your gain taxable on sale. 

(This is assuming both halves of the duplex are the same square footage)


Your basis in the property is going to be purchase price and renovations- but it's also going to be split up. 

The basis  in your primary residence half- and the basis of your rental half. 

I would strongly encourage finding a professional to get this taken care of for you- If you weren't aware of how to report it correctly to the IRS before, there's a good chance it wouldn't be correct if responded/ reported to them now as well. 

@Will Dee

Notices from the IRS are almost all vague.
They almost make it so that you are scared, accept the tax due and make the payment.

You may owe less than what is requested by the IRS because they will always normally assume worst case scenario. The likely worst case scenario in this case is that you have $0 basis and were not eligible for the section 121 exclusion.

You should consult with an accountant and see what steps you need to take to get you to resolve the issue with the IRS.
You may also get a state notice soon.