House Sale Capital Gains in a Divorce

[KC_mathers]

I bought a house 10 years ago prior to marriage I got married the next year. Last year as part of the divorce settlement we sold the house and split the proceeds, however because it was purchased prior to my marriage the 1099-S has only my name and the full capital gains. Since splitting the capital gains was a legally binding agreement of the divorce do i only put half of the amount on the form as my selling price? Is there some way to claim half of it as a loss?

[Vanessa A]

Yes, you will only enter half the proceeds, but you will need to issue your ex spouse a 1099 for the amount they received.  You will need to file the 1099s along with a 1096 Transmittal Form with the IRS to tell the IRS that half of the money you received for the house was given to your ex spouse.

If the check was issued to both you and your ex spouse, then you could contact the issuing party and ask for a corrected 1099S if they are willing to do so. 

[KC_mathers]

Thank you very much. One clarification, the amount of money that was received and split in the divorce was the capital gain minus the asset basis (200K). So the 1099S says gross proceeds 650K, but what was actually split was more like 450K (225K each). because that's the gross proceeds minus the mortgage payoff which was approximately the same as the asset basis. Do I claim 425K in gain and the offset in asset basis, and then issue her the 1099 for just 225K, or are we supposed to split the asset basis even though technically she wasn't involved in the purchase?

[PattiF]

Yes, you can issue the 1099S to her for just the $225K and use the cost basis for your return. 

Nominee Actions/Returns:

Generally, if you receive a Form 1099S 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 1099S) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list yourself or the original Payee as the payer and the other owner, as the recipient. On Form 1096, list yourself or the original Payee 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 there.

Split the amount as needed and enter only the necessary portions on the appropriate returns.

@KC_mathers