Divorce, Real Estate, Quit Claim, Tax Deduction

What is the name of your state (only U.S. law)? Ohio.
Dissolution granted in 95. The decree stated the house should be sold ASAP and costs/profits spilt 50/50. Quit claim was signed 5 months later. 15 years and lots of my money for improvements/repairs, the house finally sold. He won in court and I gave him money. Can I claim that on my taxes as a deduction? Does he have to claim it as income?What is the name of your state (only U.S. law)?

qtrpt said:

What is the name of your state (only U.S. law)? Ohio.
Dissolution granted in 95. The decree stated the house should be sold ASAP and costs/profits spilt 50/50. Quit claim was signed 5 months later. 15 years and lots of my money for improvements/repairs, the house finally sold. He won in court and I gave him money. Can I claim that on my taxes as a deduction? Does he have to claim it as income?What is the name of your state (only U.S. law)?

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No. It's a property division process, so it's not income to him or deductible to you.

You can, however, include any repairs you made in the cost basis of your share of the house to reduce your capital gains on the sale, if any.

mistoffolees said:

No. It's a property division process, so it's not income to him or deductible to you.

You can, however, include any repairs you made in the cost basis of your share of the house to reduce your capital gains on the sale, if any.

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I am going to disagree.

Yes, its a marital property division. If it was her primary residence each would still have their 250k capital gains exclusion and its unlikely that there would be any tax issues. (yes, even after 15 years)

However, if for some reason it had been converted to an investment property of some sort, each would file Schedule D reporting their applicable percentage of basis and and applicable share of capital gain, if any.

LdiJ said:

I am going to disagree.

Yes, its a marital property division. If it was her primary residence each would still have their 250k capital gains exclusion and its unlikely that there would be any tax issues. (yes, even after 15 years)

However, if for some reason it had been converted to an investment property of some sort, each would file Schedule D reporting their applicable percentage of basis and and applicable share of capital gain, if any.

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So where's the disagreement? That's what I said - there are no income taxes due. The amount she spent can be used to reduce her capital gains, if any. Nothing you said was any different.

mistoffolees said:

So where's the disagreement? That's what I said - there are no income taxes due. The amount she spent can be used to reduce her capital gains, if any. Nothing you said was any different.

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What I said was completely different.

Example:

Home was purchased at 200k and 100k in improvements were made to the home. Giving total basis of 300k.

House has a mortgage of 100k and sells for 400k. Total capital gain is 300k.

Assuming an investment property rather than a primary residence, and husband gets 25% of the proceeds then husband's Schedule D would reflect:

Cost basis 75k, sales price 100k, capital gain 25k

Wife's schedule D would reflect:

Cost basis 225k, sales price 300k, capital gain 75k

If it was a primary residence then all capital gains would be excluded and there would be no tax.

LdiJ said:

What I said was completely different.

Example:

Home was purchased at 200k and 100k in improvements were made to the home. Giving total basis of 300k.

House has a mortgage of 100k and sells for 400k. Total capital gain is 300k.

Assuming an investment property rather than a primary residence, and husband gets 25% of the proceeds then husband's Schedule D would reflect:

Cost basis 75k, sales price 100k, capital gain 25k

Wife's schedule D would reflect:

Cost basis 225k, sales price 300k, capital gain 75k

If it was a primary residence then all capital gains would be excluded and there would be no tax.

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You provided more detail, but nothing that makes my statement wrong. I said it would affect capital gains, IF ANY.

In one case, there are none, in the other case, there are some capital gains, but my statement is correct in either case. IF ANY means that it could be used to reduce capital gains taxes if there were any.

Instead of simply adding more detail as you did, you said you disagreed with my statement - even though there was nothing inaccurate about my statement.

mistoffolees said:

You provided more detail, but nothing that makes my statement wrong. I said it would affect capital gains, IF ANY.

In one case, there are none, in the other case, there are some capital gains, but my statement is correct in either case. IF ANY means that it could be used to reduce capital gains taxes if there were any.

Instead of simply adding more detail as you did, you said you disagreed with my statement - even though there was nothing inaccurate about my statement.

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Your statement tended to give the impression that she would have to claim into income (whether excluded in the end or not) the money that went to her ex. She was asking if she could deduct that money from her income. I was explaining that it wasn't necessary to deduct the money from her income, because it would never be included in her income in the first place.

LdiJ said:

Your statement tended to give the impression that she would have to claim into income (whether excluded in the end or not) the money that went to her ex. She was asking if she could deduct that money from her income. I was explaining that it wasn't necessary to deduct the money from her income, because it would never be included in her income in the first place.

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Where did I make that claim?

What I said was "No. It's a property division process, so it's not income to him or deductible to you. "

Seems to me that you're reading things that aren't there.

mistoffolees said:

Where did I make that claim?

What I said was "No. It's a property division process, so it's not income to him or deductible to you. "

Seems to me that you're reading things that aren't there.

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But his share of the house proceeds ARE income to him. They may be excludable if its a primary residence, but his share is income to him, NOT her.

LdiJ said:

But his share of the house proceeds ARE income to him. They may be excludable if its a primary residence, but his share is income to him, NOT her.

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Wow. You're really confused. No, it's not income. At best, it's capital gains- which is why I specifically stated that they might have to pay capital gains taxes.

mistoffolees said:

Wow. You're really confused. No, it's not income. At best, it's capital gains- which is why I specifically stated that they might have to pay capital gains taxes.

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Misto...since when is a capital gain not income?...LOL. A capital gain is one of the many forms of income that exist. That's tax law 101.

LdiJ said:

Misto...since when is a capital gain not income?...LOL. A capital gain is one of the many forms of income that exist. That's tax law 101.

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Now you're really going off the deep end.

Clearly, the context was whether it was earned income. It is not. Nor is the payment a capital gain. The payment is simply a property division, not income.

Now, capital gains MAY be due, but they became due on the SALE of the property, not on the transfer of cash.

mistoffolees said:

Now you're really going off the deep end.

Clearly, the context was whether it was earned income. It is not. Nor is the payment a capital gain. The payment is simply a property division, not income.

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Misto, you honestly shouldn't get involved in tax discussions. Arguing with someone who has been a tax professional for over 25 years just highlights what you don't know/don't understand.

Never has this conversation had anything whatsoever to do with earned income. Income is income, whether its wages and salaries, interest, dividends, capital gains, self employment income, farming income, ministry income, royalty income or any other kind of income. Income is income. That is as basic as it gets.

This OP asked if she could deduct the money that she paid her ex. The answer to that was no. However, the answer to that was no because the money never came into income for her, therefore there is no need to deduct it. The portion her ex receives is HIS income, to deal with on HIS tax return. The fact that its a capital gain (assuming that there is a taxable gain) does not change the fact that its income.

Alimony isn't earned income for the recipient either...but its income.

LdiJ said:

Misto, you honestly shouldn't get involved in tax discussions. Arguing with someone who has been a tax professional for over 25 years just highlights what you don't know/don't understand.

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Sorry, but you haven't impressed me all that much with your tax professionalism. I'm still laughing over your insistence that pre-tax and after-tax assets are equal and can be traded off 1 for 1.

My initial statement was 100% correct and you are quibbling over silly distinctions that have no real meaning.

mistoffolees said:

Sorry, but you haven't impressed me all that much with your tax professionalism. I'm still laughing over your insistence that pre-tax and after-tax assets are equal and can be traded off 1 for 1.

My initial statement was 100% correct and you are quibbling over silly distinctions that have no real meaning.

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Give it up Misto. You should know better than to prove a woman wrong with logical evidence.