Hello ginger,
On the home that was sold for $450,000, what was your basis in that home?
Your basis would be whatever you originally paid for the home plus the cost of any improvements you made while you owned it?
This is my friend ginger's computer, my name & e-mail is R. A Smith, this_is_rasmith @yahoo.com. I moved in with Carol in 1983, she was awarded the house and it was appraised at $49,000. I made mortage taxes and insurance payments b4 & after we were married in 1987. I paid for new appliances, stove refridgerator, washer and dryer.
I recarpeted and painted the interior 3x I had the lawn resodded 2x. In preparation for sale in 2004,I replaced the water heater, sewer lines, and basically brought every thing up to code. I paid to have the pool filled in ($4k) home reroofed, Painted inside and out ($7k) new carpets, linoleum, and bathroom refurbishment ($7k)
Hello again,
It sounds as though perhaps the basis in this home was around $75,000. If that is the case and the home was sold for $450,000, then there would have been a gain of approximately $375,000 from the sale.
Since you were married at the time of the sale, you were allowed to exclude $500,000 from that gain, which means you would not have owed any taxes. If your wife had been single, she would have only been allowed to claim an exclusion of $250,000, and she would have been liable for tax on the additional $125,000 from the sale. That would have been taxed at a rate of 15%, so she would have owed approximately $18,750 in taxes at that time.
I am not quite sure exactly what you are trying to determine here other than that. I realize you are saying that she kept all of the profits from the sale and you do not feel she was justified in doing so. But that would be something a court would need to determine. But as far as the tax situation, if she had only been allowed to claim an allowance for the $250,000 for herself, then this would have resulted in $18,750 extra in taxes that she would have owed at that time.
If I have misunderstood your question, please let me know and I will try to further assist you.
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Thank you
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad