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I have a question about capital gains tax on a home. Selling…

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I have a question about capital gains tax on a home.

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Selling a home, expect gain of $50,000. Lived in the home for 21 months. Selling due to a divorce.

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1/22/2018
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,910
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. My name’s Lane …

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

Bear with me a moment while I type up my response. Then if you have further questions we can go from there.

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Customer reply replied 7 months ago
Ok thanks

If you lived in the home for any 24 months (doesn't have to be continuous) out of the five years before the sale, 250,000 of gain is excluded from taxation.

...

And unless you receive a 1099-S, there is not reporting to be done either.

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If you DO get a 1099-S (IRS will get one as well) then report the gain in the following way.

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Schedule D (or your software program) will ask of your basis in the home. Provide the same number for basis and you provide for your part of the sales price. This will show no capital gain.

...

But again, if there's no 1099-S (and you likely signed a paper at closing so that none would be sent) you have no tax and no reporting obligation here at all

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Customer reply replied 7 months ago
We have not lived in the home for 2 years. Is the first two years prorated?

It can be, because of the life change.

...

How long were you there?

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Customer reply replied 7 months ago
21 months

Bear with me just a sec and let me pull up the regs.

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This comes under "unforeseen circumstances."

...

Unforeseen circumstances includes any factor that would make the house unaffordable, or a change in financial status that would make it difficult to maintain the home, such as the involuntary conversion of a home, or damage from disasters; or death, divorce, or legal separation or even a change in employment with a reduced income making it hard for the taxpayer to afford the house

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So if you sell your house at a gain of $140,000 because of divorce, but only lived in the house for 1 year as a principal residence, then you can claim 50% of the exclusion amount, or $125,000. Hence $125,000 would be tax-free but the remaining $15,000 gain would be taxable.

...

In your case you can claim (21/24 x(###) ###-#### = 218750 of exclusion

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You gain is far below that, at 50,000

Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,910
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Thanks for the rating,

Lane

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