What is the name of your state? VirginiaMe and my boyfriend co-owned a bail bond company (legal eagle bail bonds, inc) last year and we were building a house ($325K construction loan in my name on 8/04, the closing costs, loan interest payments, permit fees, etc were made from business account till 2/05 then from my personal credit card account.)We both received a monthly salary from the business account of $2000 each for a total of $10,000 each last year - taxes were just deducted from the operating business account instead of checks being cut to each of us.
Then, this year, the business was shut down by our insurance company due to high bond forfeitures, we broke up and I sold the house this year in July for $425K. I got a check for $81000. Of this amount, I had to pay $23000 in credit card bills from the business (12,000 on business credit card and $11000 on my personal credit card) and I put $23000 in an 8 month CD to hold because we both may possibly owe this money (or even more) to the bail bond insurance company next year. I gave him $5000 and myself $5000 and the remaining $25000 is currently in an investment account. What do I need to show to the IRS in order to prove that the 67,000 profit from the house sale (81,000 - 14,000 in expenses (closing costs, permit fees, blueprints, etc) needs to be split between us so that we each pay taxes only on our share? Also, he says that we shouldn't have to pay taxes on the $23K because it's in an 8month CD. And, what should I pay him now and how should I document it?