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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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Experience:  10 years experience
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My question is this? I live in northern California. My wife

Customer Question

Hello,
My question is this? I live in northern California. My wife and I divorced this year. We sold one of three properties and split the money 50/50. I received a check for approximately 38,000. The wife then complained and requested the entire amount from the house sale. We agreed that I could keep 10,000 since that was the original promise and I promised to pay her back before the divorce was finalized in October.
As part of the divorce agreement, which is in writing, I agreed to pay her back the 25K and I did but that initial check of 38K moved me into a new tax bracket.
Now, before I start my filing process I want to know what forms and/or actions I need to do?
Rick Taylor
Now... That 35,000 was reported income for me. I only ended up with 10,000. What do I need to do as far as capital
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Hi,

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First, would you please clarify whether the property was part of the property settlement?

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If so this will determine the basis for the capital gain here ... and remember capital gain is sales price minus basis (basis being your purchase price plus any improvements)

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The check you received may be more about difference in sale price and loan amount ... but the loan amount doesn't affect basis, it's just how you FINANCED that purchase.

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And again, the amounts that were delineated in the divorce decree will help with both basis (property settlement basis is what's called carry-over basis, its the same as if one spouse gifted the asset or a portion of an asset to the other spouse) and tax treatment all around.

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Also, who was on the deed for the property? This will drive part of the answer as well

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Lots to talk about here

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If you'd like I can make what's called an additional services offer so that we can discuss over the phone ... might be more efficient

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