Capital Assets Held for Personal Use

Generally, gain from the sale or exchange of a capital asset held for personal use is a capital gain. Report it on Form 8949 with box C or box I checked (if the transaction is short term) or box F or box L checked (if the transaction is long term). However, if you converted depreciable property to personal use, all or part of the gain on the sale or exchange of that property may have to be recaptured as ordinary income. Use Part III of Form 4797 to figure the amount of ordinary income recapture. The recapture amount is included on line 31 (and line 13) of Form 4797. Don’t enter any gain from this property on line 32 of Form 4797. If you aren’t completing Part III for any other properties, enter “N/A” on line 32. If the total gain is more than the recapture amount, enter “From Form 4797” in column (a) of Part I of Form 8949 (if the transaction is short term) or Part II of Form 8949 (if the transaction is long term), and skip columns (b) and (c). In column (d) of Form 8949, enter the excess of the total gain over the recapture amount. Leave columns (e) through (g) blank. Complete column (h). Be sure to check box C or box I at the top of Part I or box F or box L at the top of Part II of Form 8949 (depending on how long you held the asset).

Loss from the sale or exchange of a capital asset held for personal use isn’t deductible. But if you had a loss from the sale or exchange of real estate held for personal use for which you received a Form 1099-S, you must report the transaction on Form 8949 even though the loss isn’t deductible. Also, if you had a loss from the sale or exchange of personal property for which you received a Form 1099-K, you must report the transaction on Form 8949 or on Schedule 1 (Form 1040) even though the loss isn’t deductible.

Example.

You have a loss on the sale of a vacation home that isn’t your main home and you received a Form 1099-S for the transaction. Report the transaction in Part I or Part II of Form 8949, depending on how long you owned the home. Complete all columns. Because the loss isn’t deductible, enter “L” in column (f). Enter the difference between column (d) and column (e) as a positive amount in column (g). Then complete column (h). (For example, if you entered $5,000 in column (d) and $6,000 in column (e), enter $1,000 in column (g). Then enter -0- ($5,000 − $6,000 + $1,000) in column (h). Be sure to check box C or box I at the top of Part I or box F or box L at the top of Part II of Form 8949 (depending on how long you owned the home).)