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I co-own a home in CA and we're parting ways. My ex has

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I co-own a home in...
I co-own a home in CA and we're parting ways. My ex has agreed to buy me out and I'm wondering if I have to pay taxes on the money if I'm reinvesting it in another property.
Submitted: 4 months ago.Category: Tax
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3/15/2018
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,757
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Thank you for choosing this Q&A service for assistance. My name is***** will be assisting you. When you say ex, is this an ex-husband/wife, ex-boyfriend/girlfriend? If an ex husband/wife, were they ordered by the court to buy you out?

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Customer reply replied 4 months ago
Ex-boyfriend. No court order. We mutually agreed.
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

It doesn't matter if you are reinvesting the money, if the buyout amount exceeds your initial basis(cost) in the home, you will incur capital gains and have to pay tax on that amount unless you meet the home sale exclusion requirements. If you meet the requirements, you can exclude up to $250,000 of the buy-out (sales) price.

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There are actually 5 requirements, but the two listed are the main requirements. SEE BELOW;

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Eligibility Step 2—Ownership Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement. For a married couple filing jointly, only one spouse has to meet the ownership requirement.

Eligibility Step 3—Residence Determine whether you meet the residence requirement. If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

For the other requirements, you can refer to IRS Pub 523, page 3.

Link to IRS Pub 523.

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

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Regardless to whether you incur a gain or a loss on the buy-out, you are required to report the sale on the Schedule D, and the Form 8949.

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