Section 121 gains exclusion reported on what IRS forms if home was rental for 2 yrs??

[Jason V.]

It's my understanding that if there's a "partial exclusion", I'd use a Form 8949 with Code H...

And if it's "fully excluded" and there's no 1099-S issued (which I indeed received no 1099-S), then I'd simply not mention it at all.

But my biggest question is.... How do I determine if my being used as a rental for 2 out of past 5 years makes it fully or partially excluded?!?

Much thanks appreciated!!

[Jeff Nash]

Based on your fact pattern (was a personal residence first and then a rental, not vice versa) I think you might be looking better. That non-qualified use provision was written so that taxpayers couldn't convert highly appreciated rentals to personal residences, live in it for 2 years, and avoid paying any capital gains. So I think you might have misinterpreted what it was saying and it  might make sense if you read the worksheets carefully - you do not include any period of non-qualified use that occurred after the last day that the taxpayer or spouse used the property as the principal residence during the 5-year period prior to the date of sale. You count the days backward from the time of sale to address your last point. Hopefully you will be pleasantly surprised with the outcome.