How do We split capital Gains on sale of property after divorce?

[matrobw]

My wife and I sold a piece of vacant land last year (which we owned it for 16 years) while we were still married.  Both of our names were on the note.  We divorced in October.  How do I adjust my schedule D to reflect each of us having a 50% responsibility for the long term capital gains on our individual tax forms?

[IsabellaG]

You can report 50% of the proceeds and 50% of the cost basis on your own return to report your share of the gain.

See the instructions to Form 1099-S under Multiple Transferors and spouses. At the time of the sale, you could have requested an uncontested allocation of the proceeds.

 But if you received one 1099-S that is only in your name,you may need to file a Nominee Form 1099-S for your ex-wife.

Nominee returns. Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area.

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:  Click here to order forms or publications from the IRS. This is to avoid having to explain this to the IRS.

If you don't do this, but each of you reports your share of the proceeds and the gains, the IRS will probably contact you, but you can respond that the sale was reported correctly.

[jruss2828]

How specifically do you report just your 50%? Do I just put 50% of the proceeds and adjustment on form 8949 with no explanation? I read the instructions for form 1099-s but it does not address how to report my share.

[AmyC]

Yes, you are reporting only your share of the income and expenses. If the form has both of your names, the IRS will understand seeing half on each return. If the form is in your name only, you need to give the other person a form 1099-S from you for their half of the income. You file it with the IRS separately. That completes the loop for the IRS to see who got what!  Be sure to use the same tax year form. In your case, a 2020 form for 1099-S.

Instructions for Form 1099-S (2021) | Internal Revenue Service states:

You can enter into a written agreement at or before closing to designate who must file Form 1099-S for the transaction. The agreement will identify the person responsible for filing if such designated person signs the agreement.

@jruss2828  

[Peepsnj]

I saw the part about submitting two forms 1099 S.  Can this be done in TurboTax or do I need to file on paper?

[RobertB4444]

You can file 1099 forms using TurboTax.  Just click here.

[Scootertucker53]

My wife and I will be filing Married separately. We received a 1099S sale of home form with both names with my social security number. Do we use 50% of the home sale proceeds in calculating our capital gains exclusion

[DaveF1006]

@Scootertucker53  Yes, you will use 50% of the proceeds and 50% of the basis to calculate your capital gains exclusion, up to $250,000 for each share of the capital gains.

[Radsteke]

Hi, I am in a similar situation, but my ex and I got two separate 1099-s with half of the sale price listed on each. Am I understanding correctly that I need to go in and look at old closing documents from when we bought the house, add all the applicable costs and rollovers, split it in half, and enter that? 

[JulieS]

Yes, if you need reduce your gain, you will need to report your closing costs from when you bought the house. If you qualify to exclude your gain and the gain is less than the $250,000 exclusion, you don't need to dig for more expenses. 

You will report 100% of your 1099-S, since that was split between the two of you. You will report 50% of your original basis and closing costs, as well as any other shared items, such as remodeling costs. 

[Rosie45]

Per our Marital Property Agreement husband was to give me cash.  Instead, he gave me stock.  This is a settlement. What form must be used so that the husband pays all Capital Gains each year?  How do I report on my return?  We file MFS.

Hope you can help with these answers.

Thank you

Rosie

[Hal_Al]

Q. What form must be used so that the husband pays all Capital Gains each year?  How do I report on my return? 

A. On your form 8949, you report code N ("nominee") in column (f) and claim an adjustment in column (g) for the capital gain amount, resulting in 0 capital gain being reported on your tax return.   He reports the gain on his form 8949. 

I assume he gave you stock, which you plan to sell, resulting in a capital gain, for which you will receive a form 1099-B.  I also assume he has agreed to pay the tax on the capital gain.