Client short sold her house in February 2012 while going through a divorce. House was held jointly & mortgage was joint. I'm doing an insolvency calculation, and she has about $75,000 in her 401(k). Kicker is, in the divorce, she had to give half to her now ex, but the actual property division didn't happen until a few months later. I think she's out of luck, and the full amount is included in the calculation.
I can't use the full QPRI because most of the cancelled debt is due to a cash out refi done a few years earlier. Because of her retirement accounts, only a bit is excluded through insolvency.
I know nothing about tax law is fair, but it looks like the ex will get the benefit of my client's retirement while client has to pay tax on COD due to the account balance on the date of the sale.
If anyone has any thoughts or magic exclusion I'm not thinking of, please chime in.
I can't use the full QPRI because most of the cancelled debt is due to a cash out refi done a few years earlier. Because of her retirement accounts, only a bit is excluded through insolvency.
I know nothing about tax law is fair, but it looks like the ex will get the benefit of my client's retirement while client has to pay tax on COD due to the account balance on the date of the sale.
If anyone has any thoughts or magic exclusion I'm not thinking of, please chime in.
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