Our return got rejected, because my wife is tagged to a 1st time home buyer credit for a house that she no longer has ties to. Her ex husband owns the house out right.

[Rachel_W]

If the home was transferred to your wife due to divorce, by indicating this to the IRS on Form 5405, she will no longer be liable to pay back any of the First Time Home Buyer Credit:

Please follow these instructions to complete Section I of Form 5405: 

• Login to your TurboTax Account 
• Click "Take Me To My Return"
• Click "Federal" from the left side of your screen
• Click the "Deductions and Credits" tab at the top of your screen.
• Scroll down to "Your Home" and click "Revisit/Start" next to "Homebuyer Credit Repayment"
• Choose "Yes" this was still your main home on 1/1/2018 
• Enter Date of Purchase and click "Continue" and then "Continue" again
• Answer "No, my situation changed" and enter the date this was no longer your main home and click "the above does not apply" if applicable
• Choose "Transferred the house to ex-spouse due to divorce"
• Enter spouse's name and date of transfer

Please comment below if you need any clarification.