Capital Gain Tax on Real Estate in Divorce

[splett]

What is the name of your state?What is the name of your state? California

I was married in 1987, separated in November 2004, moved into my own place. During the marriage we purchased a house in March 2000 for 235T.

I lived in the house continuously from March 2000 to November 2004.

When I moved out, my ex continued to live in the house. He took an equity line on the house to get cash to buy me out of my interest in the house. The equity used so far is approx. 250T, of which I was directly paid 107T - this was paid to me to buy out my share in our business, furniture, etc.

The current agreement under consideration is that he will own the house until it is sold and will pay all mortgages, equity lines and expenses related to the house. At point of sale he will pay 50% of the escrow proceeds to me. I would remain on the title, I would be removed from the mortgage and the equity line debts. At point of sale I would receive 50% of the net proceeds paid out by escrow. Any further equity taken on the house prior to the sale would result in me receiving 50% of anything taken.

The house has had substantial gain in equity - is currently apprasied at 500T, appreciating at the rate of 9T per month.

The divorce has been filed with the courts, and will be final in December 2005.

We tentatively agreed to file taxes separately for 2005. All years prior were filed married, joint.

I have an option to remain on the title, and be removed from the mortgages and equity line.

Under these circumstances, when the house is sold, will I have to pay capital gain?

If yes, what must I do to ensure that I do not have to pay capital gain on the increase from the original purchase price of 235T to the sale price of 500T plus?

Thank you for your advice