Sec 121 Exclusion for Sale of owner-occupied rental property

[ejdtaxman]

Details: 

Bought and placed into service 2017. 50% rental 50% personal residence for duration. 

Lived there with spouse until 2019 when they divorced and she bought him out. 

Sold March 2023. 

I have attempted to link the sale to the home sale worksheet but I get the error that this is not possible for homes with less than 100% business use. I called support and was told (after much troubleshooting) that I will have to just turn error checking off and hopefully the IRS accepts it. This doesn't seem adequate to me so my question is, how do I calculate the exclusion (even if it only amounts to $125k since 50% business use) while still reporting the sale of the business property? 

[TaxGuyBill]

I first want to ask you to clarify the situation:  Is this all one home (one "dwelling unit")?  Or it separate "dwelling units" (separate entrances, separate kitchens, etc.)?

[ejdtaxman]

All one home. 

[Terry53029 · Accepted solution]

On the asset worksheet, just enter date of sale only. You then fill out the home sale worksheet with the deprecation info in section lV. 

[ejdtaxman]

Thanks my next Q was going to be how to account for depreciation recapture but you've solved that. Much appreciated! 

[BobKamman]

" they divorced and she bought him out. "

You probably don't mean that, you probably mean she got the house in the property settlement and he got something else, but it's important to be precise with language.

[ejdtaxman]

No, I mean she bought him out. It was not a settlement.