Marital settlement?

[Max W]

Taxpayer had a home while married. Divorced and paid ex $200000 for the title and refi in her name. Now she sold ot it. Basis is the actual carryover cost of acquisition (not half)? Plus the cash paid to her ex?   Or is this a marital settlement with no change in basis?

 

[Pacun]

I would say it is half of the original cost plus $200,000. 

Did she live in the house 2 out of the 5 years immediately before the sale?  Is the profit more than $250K?

[jklcpa]

I'd think this falls under sec 1041 for "transfers incident to divorce" and where it says that transfer is treated as a gift where the recipient picks up original basis?  And wouldn't the $200K be considered the property settlement related to the divorce and splitting of the assets and not just specific to the house?

https://www.law.cornell.edu/uscode/text/26/1041

[Lion EA]

I agree with Judy. Their combined cost basis the day before the property settlement due to the divorce is then her basis. She can add capital improvements after that date, of course. The $200,000 doesn't change her basis. Been there, done that.

[Terry D EA]

On 3/28/2022 at 2:52 PM, jklcpa said:

I'd think this falls under sec 1041 for "transfers incident to divorce" and where it says that transfer is treated as a gift where the recipient picks up original basis?  And wouldn't the $200K be considered the property settlement related to the divorce and splitting of the assets and not just specific to the house?

https://www.law.cornell.edu/uscode/text/26/1041

DITTO, this topic came up several times during my studies for the SEE Exam.