As long as you owned the home for at least 2 years and lived in the home for at least 2 of the last 5 years preceding the sale, then you and your wife may each claim an exemption of $250,000 on any gain you had from the sale.
Your gain would be calculated by taking your share of the selling price less your share of the basis in the home. Your basis in the home would be half of what you originally paid for it plus half of the cost of any improvements you made while you owned it.
Since your share of the selling price was $188,000, that amount is already below your allowed exclusion of $250,000, so regardless of what your basis is in this home, you have no gain from the sale, and will not owe any taxes on the sale proceeds.
Thank you Mike
Hello again Mike,
Here is what the IRS says regarding the sale of your primary home:
If you sold or exchanged your main home, do not report it on your tax return unless you cannot exclude all of your gain from income. Any gain you cannot exclude is taxable. Generally, if you meet the two following tests, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirement in Test 1).
Test 1. You owned and used the home as your main home for 2 years or more during the 5-year period ending on the date you sold or exchanged your home.
Test 2. You have not excluded gain on the sale or exchange of another main home during the 2-year period ending on the date of the sale or exchange of your home.
So according to IRS instructions, you are not required to report the sale of your primary home as long as you did not have a gain from the sale, which you did not. All you need to do is keep a record of of the sale and the amount you received, since that amount in itself is below the $250,000 exclusion.