Does the amount to buy out a spouse of primary residence during divorce increase the home's cost basis? What if it's transferred from a revocable trust to one of the divorcing parties?

[yoyoyiggityyo1]

Does the amount to buy out a spouse of primary residence during divorce increase the home's cost basis? What if it's transferred from a revocable trust to one of the divorcing parties?

[Mike9241]

No

According to the IRS, the basis of the property transferred between former spouses is not increased even if there is a cash payment as part of the transfer. This has been confirmed in Tax Court. The transferee-spouse takes on the transferor's tax basis, which is how future profits will be calculated.

[MaryJL]

This response sounds like  one person is transferring property to the other  as if owned  individually. Is this the same if the property is owned jointly- say partner A& B own the house ( although  Partner A owned it before marriage but added partner B to the deed on marrying) and partner A buys out partner B on divorcing?

[JohnB5677]

@MaryJL  is correct.

Look at it this way.

• Your total combined assets are $500,000
• Your Ex got:
  • $90,000 in stocks
  • and the car worth & $10,000
  • Total $100,000
• You got the house:
  • Basis $100,000
  • Worth $400,000
• You pay your Ex $150,000
  • $50,000 over the basis
  • All you did was balance the assets to $250,000 each.
  • Therefore, this was a balancing of assets and the basis of the house does not increase.