A client asked me what happens when you sell your home for a loss. Now I know that if you sell a home for a gain and are married you can exclude $500,000 of gain ($250,000 if single).
My initial thought ran to schedule D and the loss would be limited to $3,000 a year.
So since I didn’t know the answer I told the client I would get back to them after a bit of investigating. I have to admit that I was surprised at what I found. Uncle Sam wants to be our partner on the gain side and take a cut of the money, but he definitely wants nothing to do with us if we have a slight hardship and suffer a loss. None of the loss is deductible. We are just out the cash or equity or what have you. You just have to love an uneven partnership.