capital gains

[seagoing]

What is the name of your state?Fl.I would appreciate help about capital gains responsibility in this case. Married and bought home in 1980 for$20,000. after many improvements sold in 1991 for $125,000.bought another home in 91 for $180,000.Divorced in 98.At that time home value was $250,000,had equity of $150,000.Gave ex,$75000 as her %50 0f equity. Home now has an estimated value of $1,250,000.how can my capital gains tax be calculated?Wouldn't some of the gains be the responsibility of ex.?Would the $75,000 given for her equity be added to my total cost?appreciate any input.

[xylene]

Fisrt- if you are selling a 1million dollar home, see an accountant for a consult.

The home you sold in 1991 is not relevant.

As to your current home. The cost basis is 180,000. (plus improvements , etc.)

What it appraised for in 1998 when you divorced is not relvant. Nor is what you paid to your wife. Buying her equity does not increase your cost basis.

Assuming this is your main home (use test, main residence...) then you will be able to exclude some additional gains in addition to your cost basis. Consult the IRS.

Lastly- What the house currently appraises for is not relevant, only the final SALE price for computing capital gains.

Your ex wife owes no capital gains, unless she retains some owneship of the house and will be recieving some portion of the profit from the sale of the house.



Best wishes

[PghREA]

Well Stated. Consult with a CPA/tax accountant so you really understand how you are taxed.

[tranquility]

How did you pay the $75,000? Was there a division in the home ownership incident to divorce and then you later decided to pay the money to get all ownership of the house? Or, was the payment in the seperation agreement?

Generally, xylene is correct. The reason your wife wouldn't have to pay capital gain taxes on the money you paid her is because no gain or loss is recognized on a transfer of property from an individual if the transfer to the former spouse is incident to the divorce of the parties. The basis of the transferred property here is the wife's adjusted basis in the property.

Two problems with this are:
1. If one of the parties is a nonresident alien.
2. If the transfer is not incident to the divorce. (The regulations and decisions can get complex here.)

[seagoing]

Thanks all.The $75000 was paid instead of selling off the home.I kept it for my son and I.She could not afford to buy me out,and to keep as normal a lifestyle for my son as possible,I chose to buy her out.We agreed on the value using local sales,no appraisal.At this point,I feel I made a good real estate decision.It does seem odd that she had no capital gains tax since the value at divorce was almost $100,000 more than at purchase,she got her portion at that time,I kept mine in the home.Never the less,I can't complain. Thanks again.

[tranquility]

I'm going to have to go with PghREA now. See a professional. It's clear that little snippets of facts are not going to be exchanged over this list that will give enough information about the transaction. Your basis may be more than what we had supposed in the beginning. This is a good thing for you if true. Pay the money. See the guy (or girl) who knows.

[CAowner]

Originally Posted by xylene

The home you sold in 1991 is not relevant.

As to your current home. The cost basis is 180,000. (plus improvements , etc.)

This is not necessarily correct.

Before 1997, the now-revoked IRC 1034 allowed a seller to defer capital gains tax by "rolling over" the gains into another house of equal or greater value. If you did this with the gain from your house in 1991, then the adjusted cost basis for your current home is its purchase price, minus the amount of deferred capital gain from the sale of the previous home, plus any capital improvements added during ownership.

I cannot answer as to how the issue of the divorce would affect your capital gains and/or tax.

Please see a tax professional.