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What is the taxable capital gain for each 50% owner

What is the taxable...

What is the taxable capital gain for each 50% owner (divorced couple) on a 1031 Exchange property where only one owner meets the 2 of 5 years occupancy test and one of the 50% owners is now remarried?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I live in the house and meet the residency requirement and can get the $250,000 exclusion for capital gain but my ex who his now remarried can he claim the married exclusion of $500,000?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I think that's all. What else besides owing the house joint with ex but will soon sell and just need to know regarding the $250,000 exclusion on capital gain.

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Answered in 3 minutes by:
11/13/2017
Chad EA, CFP ®
Chad EA, CFP ®, Enrolled Agent
Category: Tax
Satisfied Customers: 1,381
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Welcome to JustAnswer! My name is ***** ***** I will be able to assist you today.

A 1031 is for investment or business property.

The exclusion allowed for $250,000 or $500,00 is for a single person or couple who lived at residence as there primary residence for at least two out of the previous five years.

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Is the home you are selling a primary residence or a business property?

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If you live in the house for at least the past two out of five years, then you are able to exclude the income as a single tax payer up to $250,000.

If the home was your ex spouses primary residence for at least 2 out of the previous 5 years then he may also claim the exclusion up to the allowable amount based on his filing status

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Below is a link to the specific law.

26 U.S. Code § 121 - Exclusion of gain from sale of principal residence.

https://www.law.cornell.edu/uscode/text/26/121

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(3)Property owned by spouse or former spouse For purposes of this section—

(A)Property transferred to individual from spouse or former spouse

In the case of an individual holding property transferred to such individual in a transaction described in section 1041(a), the period such individual owns such property shall include the period the transferor owned the property.

(B)Property used by former spouse pursuant to divorce decree, etc.

Solely for purposes of this section, an individual shall be treated as using property as such individual’s principal residence during any period of ownership while such individual’s spouse or former spouse is granted use of the property under a divorce or separation instrument (as defined in section 71(b)(2)).

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Chad EA, CFP ®
Chad EA, CFP ®, Enrolled Agent
Category: Tax
Satisfied Customers: 1,381
Experience: Federally licensed IRS Enrolled Agent, Certified Financial Planner (R), MBA
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Customer reply replied 3 months ago
The ex spouse has not lived in the primary residence for more than 15 years but has remarried. What you are saying is that he cannot exclude the $250,000 as a single person or not entitled to the $500,000 as a married person . Am I correct? Do you know what the capital gain percent rate is for 2017?

The capital gains rates are 0%, 15% or 20% depending on your adjusted gross income tax bracket.

If your ex spouse doesn't meet the exclusion requirements, then your ex spouse would not be able to exclude long term capital gains from their income.

Your ex spouse would have to review the divorce decree to see if they meet the special conditions cited below, since the property was not their primary residence for the past 15 years

(d) Special Rules

(B)Property used by former spouse pursuant to divorce decree, etc.

Solely for purposes of this section, an individual shall be treated as using property as such individual’s principal residence during any period of ownership while such individual’s spouse or former spouse is granted use of the property under a divorce or separation instrument (as defined in section 71(b)(2)).

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Tax payers in the 0%, 15% tax bracket pay 0% Long term capital gains

Tax payers in the ordinary income tax bracket of 28%,33% and 35 % pay 15% long term capital gains

Tax payers in the 39.6% ordinary income tax bracket pay 20% LTCG

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From what you have shared, you will be able to exclude up to $250,000 of capital gains from your share of the sale proceeds.

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Do you have any additional questions that I may clarify for you?

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Customer reply replied 3 months ago
In the original mortgage loan certain settlement fees can be added to cost basis, can i add the same certain settlement fees on subsequent loans such as refinance to the cost basis? Thank u.

Your purchase price plus settlement cost to purchase, sell or refinance the home along with repairs that you may have made over the years may be added to your cost basis of your home.

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Customer reply replied 3 months ago
Thank you
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Chad EA, CFP ®
Chad EA, CFP ®
Chad EA, CFP ®, Enrolled Agent
Category: Tax
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