Sale of personal residence after divorce

[ljwalters]

Client sold the family home after divorce. Kids are now grown and x wife wants her money.  Her name was still on deed.

x wife is not on the return.  X wife was paid out of escrow.  Do they get the 500,000 exclusion.

 

New wife does not qualify. but old wife does.

 

I thought I read somewhere that if house was kept for children to remain in at divorce the full exclulsion was still available even though one moved out.

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[Pacun]

If he files jointly with the ex, they will get the $500K exclusion.

 

How about if he was only entitled to half of the house? So, he will have to issue his ex a "selling" document showing her portion of the money.

[kcjenkins]

He and the X each get to exclude up to 250K of their share, but his new wife is not part of it unless she meets all the tests.  He's good on his .

 

Home transferred from spouse. If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it.

Use of home after divorce. You are considered to have used property as your main home during any period when:
You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home.

[jklcpa]

Your client will split the proceeds and basis with his former spouse with each reporting 1/2.
 
Even though your client files a joint return with his current wife, because he owns the home jointly with another person that isn't his spouse, he can only exclude up to $250K as long as he meets the requirements.   The same is true for his ex-wife, although you aren't concerned with that return.

 

Pub 523, use CRTL-F and search for the word "divorce" and you'll have your answers.

 

 

I DON'T THINK THIS IS YOUR CASE, BUT JUST FOR INFORMATION'S SAKE:  His situation would be different if the house was transferred to him as property settlement incident to divorce and then it was sold. If he was sole owner, then he and new wife would meet the "ownership" test, and then they'd each work through the "residency" test to determine how much to exclude. He'd most likely exclude all of his 1/2 (of the $500K, and the new wife would have to determine what % of the 24 months out of the last 5 years it was her principal residence, AND not have excluded any other home during that period also)
 
 

[ljwalters]

Thanks all