Sold a primary home
The sale of a main home and the Section 121 exclusion. Figuring basis and improvements, computing the gain, and seeing how much is actually taxable.
Taxpayer facts
Who this is and what their year looked like.
Rosa is single and sold the home she had lived in since 2016, in Nashua, New Hampshire. She has a steady W-2 job and no other unusual items this year.
She owned and lived in the home as her main home the whole time, made two major improvements, and received a 1099-S at closing.
- NameRosa L. Iverson
- Date of birth05/22/1984
- SSN001-62-4488
- Age (as of 12/31/2025)41
- Filing statusSingle
- DependentsNone
- OccupationOperations manager
- Address58 Amherst St, Nashua, NH 03064
- ResidencyNew Hampshire, full year (no tax on wages)
- Home ownership & usePurchased 04/08/2016, owned and used as her main home until the 07/18/2025 sale
Source documents
Work from these the way you would a real client's paperwork. Everything is fictional.
Objectives
What a correct return should capture.
- Recognize this as the sale of a main home eligible for the Section 121 exclusion (owned and used as her main home for at least 2 of the last 5 years).
- Figure the amount realized: the selling price less the selling expenses.
- Figure the adjusted basis: the purchase price plus capital improvements (the roof and the kitchen remodel). Note that repairs do not add to basis.
- Compute the gain: amount realized less adjusted basis.
- Apply the Section 121 exclusion (up to $250,000 for a single filer) and figure how much of the gain, if any, is taxable.
- Because a 1099-S was issued, report the sale on Form 8949 / Schedule D, showing the exclusion as an adjustment.
- Report the W-2 wages, apply the standard deduction, and reconcile withholding.
- Note that New Hampshire has no tax on wages, so there is no state wage return here.
Check your work
The answer key and the complete return, the way a real client receives it: the 1040 and its schedules, the workpapers behind every number, and the signature forms.
Stuck? Work through it with Yehuda
A one-on-one, 30-minute tutoring session on this return with Yehuda Tenenbaum, EA. Bring the spot where you got stuck and we will work through it together: how the forms connect, why a figure lands where it does, and how to check your work. $250. This is education on the practice return, not advice on your own taxes.