For clarity, the mortgage doesn't come into play, the gain is based on what you purchased the home for. Below is an example of how to handle the split in TurboTax. Remember that the IRS has also received the 1099S (in your social security number) so they are looking for that number.
-You'll need the purchase price of the home (I'm going to use $300,000 for my example)
-Report the full $1,000,000 as the sales price
-report $300,000 as the cost of the home (this is my example number, use your actual purchase price)
-report all the costs of sales (for example, the commission you paid on the sale of the home)
-If you qualify for the home exclusion then report that
-if this still actually generates a capital gain (see some numbers below) then go back and increase the cost of sales by your ex's half.
Sale: $1.000.000
Purchase Price: $300,000
Cost of Sale: $25,000
Net "gain": $675,000
Home sale exclusion (single filing status): $250,000
Actual realized gain: (675000 - 250,000) = $425,000
in order to reduce YOUR gain you would take 50% of the Net gain ($675000) and add it to your cost of sales.
new cost of sales is now $25,000 + $337,500 = 362,500
New net gain: $337,500
Less home exclusion: $87,500 capital gain
