Thank you for this link. Example 3 is exactly the scenario. I have entered both homes in Schedule D, 4797 and home #1 netted $1,900 and home #2 netted $110,000.  Since both are under $250,000 per MFS or $500,000 MFJ shouldn't capital gains on 1040 equal zero?  My result is $59,000 showing in capital gains 1040, with no other entries. Why is it showing capital gains in income?