Taxes after Sale of House after Divorce

Hello. I have just been to visit the local IRS office about tax
consequences of my upcoming house sale, but I am still uncertain how to
proceed next.
In my divorce four years ago, the deed to the jointly owned house was
given to me, but the decree requires me to pay a certain amount to my
ex-spouse on sale of the house. The amount is $100,000 plus 33.4% of the
gain since the end of 2004.
In the sale, I will have:
Basis $200,000
Amount received: $570,000
Amount I turn over to ex-spouse: $130,000
The IRS agent said that I will receive a Form 1099-S from the title
company, indicating a sales price of $570,000; and that I can file a
1099-S form myself as a "nominee recipient" to indicate that I passed
$130,000 of the sales proceeds to my ex-spouse.
Under these circumstances:
1. What do I use as my basis in reporting the house sale? The entire
$200,000 or just a part of it?
2. Will I be able to claim the full $250,000 capital gain exclusion on
sale of my main house?
3. Will my ex-spouse also be able to claim a $250,000 capital gain
For Question 3, the agent referred me to IRS Publication 523, Selling Your
House, page 15, which indicates that you are "considered to have used
property as your main home during any period when (1) you owned it, and
(2) your spouse or former spouse is allowed to live in it under a divorce
or separation instrument and uses it as his or her main home."
Would my ex-spouse qualify under this rule? How do I determine whether
the law counts him as "owning" when the deed is just in my name?
Many thanks for any help you may provide. I am just trying to get all my
informations in order before visiting the tax attorney because I wasn't
able to get a clear answer on an earlier visit.
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$200,000. You own the whole thing - and she cashed out her share of basis to you with the $100k (equal to her basis).
You didn't tell us how long you actually lived in it. If you have 730 days in the 5 year period ending on the date of sale, then yes.
Same as answer #2. However, her basis is zero as she's not an owner. She excludes the first $100k as a division of property due to divorce, and the 33.4% may be offset by the $250k exclusion or part thereof.
Of course, your numbers appear simplified - in that they don't account for costs of purchase that were capitalized nor costs of sale. Don't forget them.
$100k + 33.4% does not equal $130k. Is her share properly computed?
Reply to
D. Stussy
Four years ago you say? Well, I don't think I agree with the IRS agent who advocates giving another 1099-s form to ex spouse. What we have here is a property settlement, it seems.
Anybody else see it "my way?"
ChEAr$, Harlan Lunsford, EA n LA
Reply to
Harlan Lunsford
Seems to me she purchased the property from her spouse, but deferred payment until the subsequent sale. So her basis is $200,000 plus $130,000.
Is that what you mean?
Reply to
Stuart Bronstein
In article ,
Where does the basis come from? Is that the amount that both of you together initially paid?
What was the value at the end of 2004?
That implies that $30,000 is 33.4% of the increase, so the value at the end of 2004 was around $480,000. Is that correct?
Does your ex-spouse still have ownership interest? It appears that the amount you pay is for his portion.
If you've lived there enough recently, yes.
Why do you care?
Reply to
Many thanks for taking time with this, Seth.
Yes, the basis that I am using ($200,000) is the price that we both paid plus $3000 for a wood floor that we put in.
Yes, you are right: The $130,000 is $100,000 plus 33.4% of the gain since 2004 (and the appraised value in 2004 was $480,000).
I think you've identified the key question in answering my other issues: Does my ex-spouse have an ownership interest? I think this is what I need to get the lawyer to determine. One IRS Agent that I talked to said that the ownership issue was determined solely by whether my ex-spouse was still on the deed; another said it was more complicated than that and the lawyers would have to provide us with an opinion.
As for why I care about my ex-spouse's cap gain situation, I could say something about caring about his financial well-being, but more to the point: we have agreed to split any cap gain tax that needs to be paid.
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