Is there something that a homeowner needs to do to claim the homeowner exemption if the home is sold in one year but payment is not received until the following year?
Does this question even make sense?
Thanks for any insight.
Might be an installment sale? But taxpayer can elect to report all the gain in year of sale if so (using installment sale tax form). If all the gain is excluded and there was never any depreciation, it doesn't even show up on Schedule D.
-Mark Bole
That's what I was thinking. But I was wondering whether something might have been missed that would preclude it.
This comes about as a result of a divorce. Husband and wife agree that the husband will buy the wife out at a specified price. Wife moves out but they don't complete the transaction, in part because the divorce hasn't completed yet.
Wife moved out more than three years ago. I want to preserve the §
121 exclusion for her by claiming that the actual sale occurred when they signed the contract and she moved out, but that the payment for her interest came much later.
Doesn't husband's occupancy count while they're still married?
Seth
Secti (A) $500,000 Limitation for certain joint returns Paragraph (1) shall be applied by substituting ?$500,000? for ?$250,000? if? (i) either spouse meets the ownership requirements of subsection (a) with respect to such property; (ii) both spouses meet the use requirements of subsection (a) with respect to such property; and (iii) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3).
have lived there 2 of the last 5 years.
The husband's occupancy only counts when they're divorced:
(B) Property used by former spouse pursuant to divorce decree, etc. Solely for purposes of this section, an individual shall be treated as using property as such individual?s principal residence during any period of ownership while such individual?s spouse or former spouse is granted use of the property under a divorce or separation instrument (as defined in section 71 (b)(2)).
This applies to sale of the jointly-owned real estate to a third party, right?
Isn't this (OP) just a property transfer incident to a divorce? Wife gets cash, husband gets property (instead of forced selling of the property and splitting the proceeds)? How can one sell to the other while still married, or get a Sec. 121 exclusion?
It's the husband who has to worry someday about getting only a $250K exclusion if he's the only owner.
Maybe Pub 504 will shed more light...
-Mark Bole
It sounds like a property settlement incident to a divorce. No gain or loss is recognized on the transaction; therefore there is no need for Section 121.
The ex-husband's basis is what he and the ex-wife originally paid for the property + any capital improvements.
I agree with Bill. This is a property settlement, not a sale. No tax consequences to wife.
Thanks for all the input. I hadn't thought to look at it that way, but you're right. Looks like I don't need to worry about it.
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