Disposition of Real Estate

[Christian]

A client and his wife who owned four rental houses are divorcing this year. The settlement stipulates that he will give her one of the houses for her home. In filing his 2016 return next year I am uncertain as how to show the disposition of this asset or do I simply drop it from the 2016 return with no disposition indicated. The remaining three rental properties apparently will be owned by him. 

[Lynn EA USTCP in Louisiana]

My unresearched response - I'd do the disposition, either 'converted to personal' or 'do not calculate gain or loss', whichever one takes it out of service as of the date of transfer to the ex- and does not show it on the 4797.

 

[jklcpa]

I would do as Lynn suggested also. I don't see this as much different than if a couple files a joint return one year and files MFS subsequently. One or both of them would have to report the rental. It hasn't disappeared completely, just being reported by one of the other of them. If IRS questions it, it is easily explained that the properties were split as part of the splitting up marital assets, that it was not a disposition.

[Christian]

Thank y'all for your replies. I'll print the page and place it in his file for 2016.