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Old 02-16-2014, 03:16 PM
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Disposition of Home

My wife and I are separated. We are getting an uncontested divorce. All of our assets split nicely except for our real estate assets. All will occur in 2014.

We own our main home free and clear, and we own a rental home with a 180K mortgage. FMV for the main home is 420K, and the rental FMV is 220K. We purchased the main home in 2001 for $305K, and we pruchased the rental home in 2008 for 300K. I will be keeping the rental home, and she will be keeping the main home. Her brother will be buying a partial stake in the main home for 190K, and that money will go to me. I believe that I will not have to pay income tax on the 190K I receive. Can you confirm this and advise the best way to execute this transaction?



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Old 02-17-2014, 02:34 AM
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Originally Posted by MrPiffles View Post

#1;We own our main home free and clear, and we own a rental home with a 180K mortgage. FMV for the main home is 420K, and the rental FMV is 220K. We purchased the main home in 2001 for $305K, and we pruchased the rental home in 2008 for 300K. I will be keeping the rental home, and she will be keeping the main home. Her brother will be buying a partial stake in the main home for 190K, and that money will go to me. I believe that I will not have to pay income tax on the 190K I receive.



#2;Can you confirm this and advise the best way to execute this transaction?

#1;I guess it depends; if you transfer your ownership rights to your wife then you will not have any interest in the property. So you won't have to pay capital gains if she sells the property. . I mean aslongas it is no longer your home, cg excl rule does not apply to you, but instead applies to your spouse on the sale of the home. She'll have to look to these rules to see if she qualifies for the home-sale exclusionif not and he buys your portion of the ownership from you then aslong you satisfy the conditions, you are subject to $250K gain exclusion. under the tax law of 1997,a taxpayer can exclude $250K ($500K in the case of married taxpayers filing joint returns) of gain on the sale of a principal residence if certain conditions of ownership and use are met. Aslongas a taxpayer must have both owned and used the residence as his or her principal residence for at least two of the preceding five years prior to the sale. If you and your spouse file joint tax returns for the year of sale of your principal residence, only one of you is required to meet the ownership and use requirements. If one spouse receives the residence from the other based on the terms of a tax-free property transfer between spouses which is incident to divorce, the ownership holding period for the receiving spouse includes the period during which the transferring spouse owned the residence. For example, if the husband holds title to the principal residence during marriage, and transfers the residence to the wife pursuant to a divorce instrument, the wife will be deemed to have owned the residence for the period during which husband owned the residence. However, when it comes to usage, the wife must meet these requirements independently. In the above example, if the wife did not live in the residence for two of the prior five years, she would not qualify for the exclusion until she does meet the use requirement. For that reason, if the residence is going to be sold immediately after a divorce, ownership of the residence should not be transferred to a spouse who does not independently meet the use requirement.

If an individual meets the ownership requirement, but his or her former spouse has use of the residence under a divorce or separation instrument, then that individual will be treated as having used the residence during the period that his or her spouse uses the residence. Another example: If husband and wife own the residence jointly and wife is granted use of the residence by a separation document, husband will be treated as meeting the use requirements if the residence is sold during the period wife has been granted the use of the residence. In other words, the husband would be treated as using the residence even though wife is the occupant in this scenario.





#2;as mentioned above.



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