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Drake Software User’s ManualSales of Assets• Entering data to calculate the tax implications of the transaction• Allowing the program to reduce the maximum exclusion if the taxpayer is eligiblefor part, but not, all, of the gain exclusion• Applying the appropriate treatment for the gain (loss) on the transaction• Indicating whether a surviving spouse is taking the MFJ (currently $500,000)exclusion for gain on the sale.• Entering data to calculate the amount of recapture in a year of sale if Form 5405,First-Time Homebuyer Credit, was taken on the homeNEW FOR2008The Form 5405 Information box allows you to link the HOME screen tothe 5405 screen. It has two override fields, to be used only if the first-timehomebuyer credit was not calculated in a prior-year version of Drake.A Primary Residence Calculations worksheet (WK_211 9; previously Worksheet forSale of Home) is generated with the return. It consists of up to three pages:• Worksheet 1: Adjusted Basis of Home Sold• Worksheet 2: Gain (or Loss), Exclusion, and Taxable Gain on Sale of Home• Worksheet 3: Reduced Maximum ExclusionThese worksheets are for informational purposes only to allow the basis in the hometo be tracked. If no date of sale is entered, only Worksheet 1 contains data when generatedwith the return.Updatingfrom thePrior YearNew this year, the following fields in the HOME screen are included in the Drakeupdate routine each year:• Date home was purchased• Basis of home fields• Form 5405 check box (stating that First-Time Homebuyer Credit was taken)These fields will be updated as long as there is not a date in the Date home was soldfield. Once the home is sold, there is no need to continue tracking the basis.Schedule DSection 121CalculationConversionto BusinessUseThe home sale flows to Schedule D only if the gain on the sale exceeds the exclusionamount. If Schedule D is generated, both the gain on the home and the Section 121exclusion (if applicable) appears on Schedule D. The WK_2119 still appears in viewbut 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 thelast five years that the taxpayer (and spouse if filing MFJ) used the home and the numberof days the home was owned during the past five years. Enter this informationunder the Reduced Maximum Exclusion heading on the HOME screen.If a home was lived in and then converted entirely to rental or business use, the transactionmust be shown on Form 4797. Select the appropriate box on the HOME screen(under the Miscellaneous heading) to carry the applicable information to the 4797.Tax Year 2008 99