Widower sold residence lived in since 1968

[AZ-Tax]

Client purchase residence with 1st spouse in 1968 for $50K. 20 yrs later divorced and paid leaving spouse $50K (for that spouses part of the house) in divorce settlement. Remarried within a couple yrs. 2nd spouse died a couple years ago. Sold home for $420K in 2009. Client keep pretty good receipts of what was invested in house over the years. Correct me I am wrong, but first I wasnt establish a cost basis with all those quailfying receipts but starting out, am I already looking at a $100K cost basis? Enter cost basis and sale price on Sch D and within Sch D, enter $250K as a negative amt.

[Lion]

Nope

Nope. Just the original $50K cost basis plus improvements over all those years. Monies paid to an ex for a property settlement due to a divorce do not increase your cost basis. Her cost basis the day after the divorce is the same as their joint cost basis had been the day before the divorce. So, start adding up receipts! (Now, if she had to pay him cash, but he retained an ownership interest, that would be a different set of circumstances.) Did second spouse have an ownership interest? Community property state? Or, marital property state? Or any way she gets a step-up on his part of the house?

[Dusty2004]

Step up in basis?

Doesn't he get a step up basis on 1/2 of the house when the 2nd wife died if she was also on the house?

You need to list a lot more information to get a good answer.

Dusty

[Burke]

I would say you are starting out with $50K cost basis. Original purchase with 1st spouse = $50K. Her half $25K. Add to your $25K = $50K. However, did new wife received 1/2 interest in house upon marriage? Was her name put on the deed? Might get step-up in FMV for one-half of house at her date of death if she was half-owner. Also, exclusion would be $500K if sold within 2 yrs of date of death of 2nd spouse.

[AZ-Tax]

Slight Correction

Spouse did NOT remarry after divorce in 1984 therefore she sold her house NOT as a widower but a divorcee. Her spouse she was married to before divorce died in 2009.

[Burke]

Okay, take 2. Does this apply?

Pub. 523, page 8. "if you received your home before July 19, 1984, in exchange for your release of marital rights, your basis in the home is generally its fair market value at the time you received it."

If not, refer to posts above.

[AZ-Tax]

Yes, divorce was final June 1984

Okay, take 2. Does this apply?

Pub. 523, page 8. "if you received your home before July 19, 1984, in exchange for your release of marital rights, your basis in the home is generally its fair market value at the time you received it."

If not, refer to posts above.

Client says they (her and her ex) got house appraised at time of divorce June 84 and it apprasied at $110K

[taxea]

Okay, from what I am reading here, TP qualifies for the step up in basis to 110K. And TP lived in the house for 3 of the last 5 years.
Now if spouse #2 was still married to TP when he died and had 1/2 interest in the house then he TP has another stepup of 1/2 the FMV at time of his death. If he died in the past two yearsTP can take 500K. if longer than that 250K.

[Burke]

I think we determined there was no spouse #2.

[taxea]

OP Remarried within a couple yrs. 2nd spouse died a couple years ago. I edited the prior post to correct the sex of the parties involved and make it read more clearly.

[Burke]

Spouse did NOT remarry after divorce in 1984 therefore she sold her house NOT as a widower but a divorcee. Her spouse she was married to before divorce died in 2009.

See A-Z's second post on 4/9/10 above.