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. Best to sell in the year you are still married and file a joint return. if both of you have lived in the house for 2 years before sale you'll get the maximum $500,000 home sale exclusion. there is probably nothing that can be done about spouse getting half the proceeds that's a property settlement issue
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. (mortgage does not affect basis)
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. Sorry, but with a gift, your basis for gain is the lower of FMV on date of gift or donors basis. so it would be your in-laws' basis.
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. Don't see an issue.
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. if you sell after the divorce is final you will be the one to report 100% of the sale (you would be the only owner at the time of sale), only get a $250K maximum exclusion and then end up having to give your ex 50% of the proceeds.
