Divorced - Sale of Residence

[Forensicacctnt]

Spouse was divorced six years ago and has not lived in the residence since then. She kept her name on the deed so the husband would not have to re-finance the mortgage. When the house sells they will split the proceeds. Since she does not meet the tests on the exclusion of any gain, would her part of the gain be subject to capital gains tax? My thought is yes it would.

[kathyc2]

From Pub 523

Separated or divorced taxpayers.



If you were separated or divorced prior to the sale of the home, you can treat the home as your residence if:

• You are a sole or joint owner, and
• Your spouse or former spouse is allowed to live in the home under a divorce or separation agreement and uses the home as his or her main home.

https://www.irs.gov/publications/p52...ublink10008999

[ATSMAN]

I am not sure how many divorced wives are still living in the same house after divorce with the ex?

That is why good divorce attorney's will tell their client to get out of the mortgage and deed, even if it means refinancing.

[Burke]

You stated she has not lived in the home for 6 years. But under the scenario posted by Kathyc2 above, it just says "spouse or former spouse." Therefore, if HE continued to live in the home and used it as his main home it appears she would also qualify for 121 exclusion.

[TAXNJ]

You stated she has not lived in the home for 6 years. But under the scenario posted by Kathyc2 above, it just says "spouse or former spouse." Therefore, if HE continued to live in the home and used it as his main home it appears she would also qualify for 121 exclusion.

Interesting as one reads more it states:

Separated or divorced taxpayers
........
“If your home was transferred to you by a spouse or ex-spouse (whether in connection with a divorce or not), you can count any time when your spouse owned the home as time when you owned it. However, you must meet the residence requirement on your own.”

[Burke]

Yes, interesting. However, it appears in this case, the home was not transferred to the spouse. She remained on the deed.

[terryats]

She meets the requirements, and is able to take the exclusion. As Kathy pointed out from pub 523

[TAXNJ]

Yes, interesting. However, it appears in this case, the home was not transferred to the spouse. She remained on the deed.

Wonder if the Spouse would treat the property as Investment property.

[Lion]

Read what Kathy said !!

[New York Enrolled Agent]

I tend to agree with the original post by Forensicacctnt.
The ex-wife has a very steep mountain to climb in order to meet the residency requirements for any gain exclusion.
.)

I'm not sure the original poster gave enough information to fully make a determination. Since the divorce was six years ago, this is the relevant piece of §121. What did the divorce instrument say?

(3) Property owned by spouse or former spouse
For purposes of this section -
(A) ...
(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)).

[TAXNJ]

I'm not sure the original poster gave enough information to fully make a determination. Since the divorce was six years ago, this is the relevant piece of §121. What did the divorce instrument say?

(3) Property owned by spouse or former spouse
For purposes of this section -
(A) ...
(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)).

Are you referencing that the ““property” is not mentioned in section 71(b)(2) rather the “Divorce or separation instrument?

§71. Alimony and separate maintenance payments

(a) General rule

Gross income includes amounts received as alimony or separate maintenance payments.
......

(b) Alimony or separate maintenance payments defined

For purposes of this section—
(2) Divorce or separation instrument

The term ‘‘divorce or separation instru- ment’’ means—

(A) a decree of divorce or separate mainte- nance or a written instrument incident to such a decree,

(B) a written separation agreement, or

(C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.

(c) Payments to support children (1) In general

Subsection (a) shall not apply to that part of

[New York Enrolled Agent]

Sorry, I'm not sure I fully understand your question.

Those words are the words of the IRC - please clarify - for "old" divorces §71(b)(2) is used. The language in §121 is different for "new" divorces.

[TAXNJ]

Sorry, I'm not sure I fully understand your question.

Those words are the words of the IRC - please clarify - for "old" divorces §71(b)(2) is used. The language in §121 is different for "new" divorces.

Was looking for the word “home” or “residence” in section 71(b)(2) when you mentioned section 71(b)(2) in your reply post.

At this point it does not matter. There are enough good reply posts. Thanks.