Hello, I would be thrilled if you can help me understand the best approach. I am in the process of divorce. We live together there is no formal separation, I am in MA not a community state. We are selling our home but the timing of the sale could be controlled to happen this year in 2021 (will still be legally married and I can file married or married filing separate) or next year when we won't be married for the full year, and I will have to file HOH.
1. The house was built for ~500K (only 350K of that was mortgaged, and I am not sure how to prove cash expenditure from 15 years ago) and it is appraised at 1.8M. I will add all the additions possible for the basis calculation, but there will still be a large capital gain even with the allowable 500K deduction we will have close to 700K in taxable gains at 15% fed + 5.1x% state, NIIT, etc.
2. The house was built on property that was transferred by my inlaws using QuitClaim deed for $1. I believe if this were considered a gift I could include a basis of present-day value at the time of gift that would add 200K to the basis, but if I have to carry their basis forward due to the transfer, it's not enough to make a difference they owned the property for a lifetime.
3. The property was transferred to me only and the deed (and mortgage) is only in my name - which I can see by this thread adds complexity at filing time.
4. My fear is that because I am the only person on the deed, I will have to pay 100% of the capital gains on this property and only get half the revenue. Unfortunately, this is a contested divorce and my spouse is not knowledgeable or cooperative. He has zero income, it would be fantastic to give the entire gain to him and pay no capital gains - which may be his reality on his half.
Any insight you could offer would be appreciated. I need to figure out if this house needs to be sold before we are legally divorced and act quickly if so because it is October and we will not be married at the end of 2022 for sure. Thank you very much!
