Sale Of Home Exclusion Rules

[GTS1101]

Hi,

I have a client whose mom has owned a home for 39 years with her ex-husband. They were divorced as of 2007. The wife did not live in the home for the last 10 years. They were separated and she rented another home. There will be approx a 288,000 capital gain. Each will split half having a 144,000 capital gain. The husband has lived there for the whole 39 years. I understand the husband can qualify for the 250,000 exclusion but what about the wife. My advice was no that the wife would have to pay capital gain on the 144,000 capital gain because she did not live there for two out of the last five years as her personal residence. I just wanted to see if you there was any way around this. Any loopholes that I might be missing or am I correct.

GTS1101

[Gene V]

You might read some of these previous post and see if they apply to your situation.

http://www.thetaxbook.com/forums/showthread.php?t=5873

[solomon]

As I recall

if this was a legal separation before the divorce, then I believe the wife qualifies for the exclusion - I think.

[jimmcg]

Don't know what the complete facts of this situation are and if they apply to this Code Sec but under Sec 121(d), special rules section, an individual is considered to have used a home as a primary residence during the period when the individual's former spouse is allowed to live in it and uses it as a primary residence under a court decreed divorce or separation agreement. Might want to read up on the applicable regs to this Sec and see if it applies to your facts.

[RLymanC]

Divorce

Was the wife awared 1/2 the house in the divorce settlement?? If yes, no CG

[Davc]

Was the wife awared 1/2 the house in the divorce settlement?? If yes, no CG

Huh? Agree with the posts requiring a legal separation. If that is not applicable in this situation it doesn't matter how the wife got the house. If awarded 1/2 the house in the divorce that means her basis is 1/2 of the total but has nothing to do with 121.

[Luis Mopeo]

From TTB, page 6-20:

"Divorced individuals. An individual is considered to have used a home as a primary residence during any period when: (1) The individual owned the home, and (2) The individual's spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses the home as a primary residence.