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To be eligible for the $250,000 exclusion, you must have LIVED in and OWNED the home for 2 of the past 5 years. While he meets that requirement, you wouldn't, so you wouldn't have a $250,000 exclusion.
(I am assuming he lived in the home for 2 of the last 5 years, since you state the accountant indicated he was eligible for the $250,000 exclusion)
Suggest talking to your lawyer to see whether your are responsible for any capital gains tax liability from the home sale.
Thank you for your response. I lived in the home as my primary residence with our children. So you are saying that because I wasn’t on the title that doesn’t make me an owner? Even though we have a contract to divide the net sale 50/50. If he had placed me on the deed he could have avoided the tax.
Has anyone ever heard of a Nominee 1099s form? Could my ex use this form to file to avoid the tax.
I am working with my attorney who believes that I am not responsible for the tax. We will need to resolve the matter in court.
@Staylor2023 as I stated, the rule is that to be elgible for the $250,000 exclusion, you must OWN and RESIDE in the home for 2 of the past 5 years.
Now that I understand the situation,
https://www.irs.gov/pub/irs-pdf/p523.pdf
Separated or divorced taxpayers. If you were separated or divorced prior to the sale of the home, you can treat the home as your residence if:
• You are a sole or joint owner, and
• Your spouse or former spouse is allowed to live in the home under a divorce or separation agreement and
uses the home as his or her main home.
<<If he had placed me on the deed he could have avoided the tax. >>
yes, because you both would have satisfied the 2 of 5 rule for ownership AND residency.
And in case you think about it, putting your name on the deed now, before the home sells, won't work, because you could not satisfy 2 years of ownership over the past 5 years :(
He now wants me to pay half of his tax liability. Thoughts? this is a legal question. Does the MSA say anything in this regard. from a tax standpoint he's responsible for 100% of any tax on the gain.
The wording in the MSA does not reference capital gains . This is the wording in the MSA.
”the net proceeds shall be divided on a 50%-50% basis between the parties.
the net proceeds shall be divided on a 50%-50% basis between the parties.
My ex is demanding that I pay half the tax. And my attorney is saying that I am not required to pay the tax. So we will need to go to court. A judge will have to read the language of the agreement and weigh-in as to whether or not he/she feels capital gains taxes should be deducted from the net proceeds.
@Staylor2023 how much is the tax versus the cost of the attorney?
take (the capital gain less $250,000) times 15% (and could be as high as 23.8%, depending on your ex's income) and then take half of that - THAT would be your half in a worst case scenario. How does that compare to the legal cost of fighting this in court or otherwise settling it?
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