Under certain circumstances, a person filing alone may be allowed an exclusion of $250,000 and a married couple can claim exclusion of $500,000. Under certain circumstances ex-spouses may qualify for this exclusion.

Capital gains are not recognized when transferring ownership of the marital home from one spouse to the other upon divorce, but it is very important to recognize that these gains will be recognized by the IRS if the receiving party sells the home in the future.

When dividing or selling equities upon divorce, it is very important to recognize any short-term or long term gains that will be paid upon the sale of the equity holdings. For example, a settlement might consist of each spouse getting 1000 shares of Walmart stock. This may sound like an even deal, but if one block of the 1000 shares was purchased at a much cheaper price per share than the other 1000 shares, the one spouse will have a greater amount of capital gain taxes to be paid when the shares are sold. Also the length of time of ownership of shares of stock will determine whether or not it will be taxed as a long-term or short-term gain.

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1. Capital Gains
   A 1997 revision in the tax laws permits each spouse to exclude up to $250,000 from gains taxes if her or she has lived in a house for two of the past five years. This is why determining the basis -- the amount originally invested in the property minus improvement -- is important. Gains are calculated on the basis.
   Contributed on 6/19/2007 by: DivorceDex.com Staff

   Category: Tax Consequences  (Applicable in All States)
2. Capital Gains Taxes on the Sale of Securities
   When it comes time to split the assets, be careful if you decide to take the stocks or mutual funds. They may have a low cost basis, which will be carried over to you. When you go to sell them at some point down the road, you may be hit with a hefty capital gains tax. Before you split, look at the cost basis (what was paid) for any security that you are dividing.
   Contributed on 1/6/2010 by: Brian B. Rockwell, CFP®, CDFA™, ChFC®New Port Richey / Trinity, FL[Total Submissions: 5]

   Category: Tax Consequences  (Applicable in All States)

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