Capital Gains and Losses

Capital Gains Tax Questions? Ask a Tax Advisor for Answers ASAP

Ask an Expert,
Get an Answer ASAP!

During a divorce settlement, a wife is awarded the home and…

Customer Question
During a divorce settlement, a...
During a divorce settlement, a wife is awarded the home and the home has to be sold, the question remains in the home is solely in the name of the husband and he receives non of the proceeds due to the settlement who is responsible for those taxes incurred under capitol gains
Submitted: 2 years ago.Category: Capital Gains and Losses
Show More
Show Less
Ask Your Own Capital Gains and Losses Question
Answered in 20 minutes by:
2/1/2016
Tax Expert: CGassist.168, Accountant replied 2 years ago
CGassist.168
CGassist.168, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 4,795
Experience: Tax Accountant
Verified

Q: who is responsible for those taxes incurred under capitol gains

A: Based on the following, the wife would be responsible for gains if there are any. SEE BELOW:

Internal Revenue Code (I.R.C.) § 1041, the "Magna Carta" of this area of the tax law, was a legislative response to a U.S. Supreme Court decision holding that the transfer of appreciated property in exchange for the release of marital rights resulted in the recognition of gain to the transferor. Congress believed that, in general, it was inappropriate to tax property transfers between spouses. The I.R.C. already recognized that spouses were able to transfer property between themselves free of gift taxes. In enacting I.R.C. § 1041, Congress recognized that the existing rules had not worked and had resulted in controversy and litigation. Congress attempted to simplify the rules by treating spouses or former spouses as one economic unit; and treating the transfer of property incident to a divorce and the transfer of property between spouses, for income tax purposes, as gifts.

I.R.C. § 1041 provides that no gain or loss is recognized on a transfer of property from a spouse or a former spouse to a spouse or former spouse if the transfer is incident to a divorce. The tax treatment described by this section is mandatory and applicable to U.S. citizens and resident aliens. The parties cannot elect out of it. The section is applicable even if the spouse or former spouse pays consideration for the property by giving up rights, transferring other property, or paying cash.

It is important to note that this is also the tax treatment of property transfers between spouses during marriage.

The transferee former spouse takes the transferor's tax basis in the real property determined immediately before the gift, i.e., the tax basis is carried over for income tax purposes. This rule is applicable whether the fair market value of the real property transferred is less than, equal to, or greater than the transferor's adjusted tax basis in the property prior to the transfer.

REFERENCE SOURCE:

If the qualifications are met, you and your spouse will qualify for the $500,000 home sale exclusion. There is likely not going to be a gain. SEE BELOW:

If You Sell Together

If you and your spouse sell your house at the time you’re getting divorced, the capital gains tax applies. But you’re entitled to exclude a total of $500,000of gain from tax if you lived there for two of the five years before the sale.(If either spouse is in the military that five-year period can be extended for up to ten years under some circumstances.) And if you bought the house less than two years ago the exclusion may be reduced.

For more information regarding the $500,000 exclusion, you can refer to the IRS Pub 523.

Link to IRS Pub 523:

https://www.irs.gov/pub/irs-pdf/p523.pdf

Let me know if I can be of further assistance to you regarding this matter.

Ask Your Own Capital Gains and Losses Question
Customer reply replied 2 years ago
If the divorce was final before the property sold, I am just trying to understand the law the 500,000 exclusion only applies if the couple were still legally married.
Tax Expert: CGassist.168, Accountant replied 2 years ago

It doesn't matter if you were married at the time of the sale, if both of you meet the residence and use test, you will still qualify for the $500,000 exclusion. You can refer to page 3 of the IRS Pub 523 for the qualifications to exclude the $500,000. Even if both spouses do not meet the residence and use test, it is likely that one does. If this is the case, then $250,000 can be excluded from the home sale.

Ask Your Own Capital Gains and Losses Question
Customer reply replied 2 years ago
I also understand under the gift aspect there is no liability. Is there anyway that she can be made liable for the funds received it was substantial enough to have capitol gains filed
Tax Expert: CGassist.168, Accountant replied 2 years ago

Q: Is there anyway that she can be made liable for the funds received it was substantial enough to have capitol gains filed

A: Yes, I provided that information in my first response. SEE BELOW:

The transferee former spouse takes the transferor's tax basis in the real property determined immediately before the gift, i.e., the tax basis is carried over for income tax purposes. This rule is applicable whether the fair market value of the real property transferred is less than, equal to, or greater than the transferor's adjusted tax basis in the property prior to the transfer.

-------------------------------

You are the tranferor, she is the transferree

Ask Your Own Capital Gains and Losses Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax expertLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask CGassist.168 Your Own Question
CGassist.168
CGassist.168
CGassist.168, Accountant
Category: Capital Gains and Losses
Satisfied Customers: 4,795
4,795 Satisfied Customers
Experience: Tax Accountant

CGassist.168 is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

R. Klein, EA

R. Klein, EA

Enrolled Agent

263 satisfied customers

Over 20 Years experience in resolving tough tax cases

jgordosea

jgordosea

Enrolled Agent

173 satisfied customers

As an Enrolled Agent you can be ensured of my competence in income tax matters.

PhillipB EA

PhillipB EA

Accountant

130 satisfied customers

Enrolled Agent with 8 years experience in tax return preparation, representation, and taxpayer consultation

Arthur Rubin

Arthur Rubin

Tax Preparer

77 satisfied customers

Over 22 years of tax preparation experience.

Bill-the-CPA

Bill-the-CPA

Certified Public Accountant (CPA)

55 satisfied customers

Seasoned professional with over 15 years in public accounting. Income, sales and property tax. Also accounting/tax software.

FredStevens

FredStevens

Accountant

37 satisfied customers

Experienced in business, accounting and tax planning for individuals, small/medium sized businesses and non-profit organizations

Shane-CPA

Shane-CPA

CPA, PFS, CGMA

11 satisfied customers

Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant

< Previous | Next >

Related Capital Gains and Losses Questions
When a property was purchased in 1965 by a couple and the
When a property was purchased in 1965 by a couple and the wife received it in 1983 as part of a divorce settlement, is Capital gains figured from … read more
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,609 satisfied customers
My husband and his mother (now 80) were both on the deed for
My husband and his mother (now 80) were both on the deed for the family home in Alamosa, Colorado where she resided. She has been in assisted living for 3 mos. now. On advise from family they took her… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,674 satisfied customers
I am in the process of reaching a settlement with the town
I am in the process of reaching a settlement with the town of Durham where they are admitting wrong and willing to pay damages.Can damages ever be non taxable?Can damages be treated as capital gains?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,328 satisfied customers
I am a realtor. I have a client that owns 2 individual
I am a realtor. I have a client that owns 2 individual condos in 2 unit building. He has not rented the 2nd unit, but used it as part of his primary residence. We plan on selling both units, will the … read more
CGassist.168
CGassist.168
Accountant
4,795 satisfied customers
I have recently been involved in a settlement agreement in
Hello, I have recently been involved in a settlement agreement in lieu of litigation against the seller of my home (one of two unit condo). The seller did not disclose the fact that he removed moldy s… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a question for a tax professional who is familiar
Hi, I have a question for a tax professional who is familiar with capital gains and family law.My ex husband and I got divorced in 2009, amicable divorce. When married we purchased a house in 2004 for… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,328 satisfied customers
I took out a homebuyer credit in taxes 2008. It was
I took out a homebuyer credit in taxes 2008. It was foreclosed in 2014. I don't know how to determine gain/losses....does the loan need to be paid back...re:form 5405 … read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,674 satisfied customers
I use turbo tax each year. I am xx and on July 26,2016 I was
I use turbo tax each year. I am xx and on July 26,2016 I was awarded Incentive units in the company. The company sold on 9-1-2016 to Henkel Corp and I have a capital gain of $253,633.77 Some of my wor… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,328 satisfied customers
Can I give $400,000 of profits from property sale to builder
Can I give $400,000 of profits from property sale to builder to hold as contingency and avoid capitol gains tax?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,328 satisfied customers
My husband and I bought our house in 1978. He passed away in
My husband and I bought our house in 1978. He passed away in 2007. If I sold my house now, what would be the Capital Gain Tax I would have to pay?… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
1,435 satisfied customers
My husband and his first wife divorced 8 years ago. He bought
My husband and his first wife divorced 8 years ago. He bought her out of an investment property appraised at $265k that he had acquired before their marriage for @$90k. The two had refinanced during t… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
My husband and I separated and sold our home in Florida. We
My husband and I separated and sold our home in Florida. We sold it 25 months after purchase, but I moved out after living there 19 months. I took a loss on the home because I put more money into the … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
My husband and I went through a divorce. I was on the deed
My husband and I went through a divorce. I was on the deed but not the mortgage. We had a capital gain. He was sent a 1099 saying the sale was reported under his SSN. Do I owe half of the capital gain… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Property sale $720,000 Basis $380,000 Expenses est. $40,000
Property sale $720,000 Basis $380,000 Expenses est. $40,000 Property is in a trust with 3 daughters (not brother), court supervised agreement stipulates 50% of net sale proceeds is to be paid to broth… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
My husband's ex-wife took a loan out under her LLC in
My husband's ex-wife took a loan out under her LLC in 2006 for a office/property for $385,000. They divorced in 2009 and my husband has been paying all the bills for the property since the inception o… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Looks like i'm getting the house in the divorce. I will need
looks like i'm getting the house in the divorce. I will need to sell it though. If I reinvest the profits by buying a condo (minus 250,00) will I have to pay capital gains? How long to I have to buy n… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
how long do I have to reinvest income received from the sale
how long do I have to reinvest income received from the sale of residential property. im recently divorced and gained 55000 dollars as a settlement. he kept the two properties and I received the money… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Question - My husband and his ex-wife sold their home in 2011.
Question - My husband and his ex-wife sold their home in 2011. The purchased the home for $460,000, sold it for $595,000. They split the proceeds and then we purchased a home for $415,000. What do I d… read more
USTaxAdvising
USTaxAdvising
Partner
Bachelor's Degree
609 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x