User's Manual - Drake Software

Retirement Income
Drake Software User’s Manual
Schedule D
Section 121
Calculation
Conversion
to Business
Use
Exclusion
for Surviving
Spouse
First-Time
Homebuyer
Credit
The home sale flows to Schedule D only if the gain on the sale exceeds the exclusion
amount. If Schedule D is generated, both the gain on the home and the Section 121
exclusion (if applicable) appears on Schedule D. The WK_2119 is still generated, but
Schedule D is added to report the taxable gain on the sale.
The software calculates the section 121 exclusion using the number of days during the
last five years that the taxpayer used the home and the number of days the home was
owned during the past five years. Enter this information in the Calculate Section 121
Exclusion section of the HOME screen.
If a home was lived in and then converted entirely to rental or business use and subsequently
sold, the transaction must be shown on Form 4797. Mark the Carry taxable
gain to 4797 box (in the Miscellaneous section) to have the applicable HOME screen
information flow to the 4797.
For two years after the death of a taxpayer, a spouse is permitted to take the MFJ
exclusion for gain on the sale of a principal residence, assuming the normal requirements
for the exclusion are met. To indicate that the surviving spouse is taking the
exclusion, mark the Recently widowed taxpayer eligible for MFJ exclusion box in
the Miscellaneous section of the HOME screen.
If the First-Time Homebuyer Credit was taken for the residence in 2008 or 2009 and
there has been a disposition or change in the use of the residence or the credit is now
being repaid, complete the applicable fields in the Form 5405 Repayment Information
section of the HOME screen.
Retirement Income
Use the 1099, 8606, and ROTH screens to enter most retirement income data. Screens
3 and 4 include fields for entering retirement data directly into the generated 1040.
Amounts entered in these fields are combined with any corresponding calculations
from the 1099, 8606, and ROTH screens.
1099-R
Use the 1099 screen to enter data, including distribution amounts, from Form 1099-R.
The 1099 screen consists of two screens: 1099-R and Special Tax Treatments. The
Special Tax Treatments screen has fields for the Simplified General Rule Worksheet,
qualified charitable distributions, HSA funding distributions, and public safety officers.
To access the Special Tax Treatments screen from the 1099 screen, click the
Special Tax Treatments tab at the top of the screen.
Items Not
Reported on
1099-R
Use screen 3 for IRA and pension distribution amounts that were not reported on a
1099-R. Enter total and taxable portions of these amounts (Figure 5-17 on page 119).
118 Tax Year 2012