I recently got a divorce. I had four rental homes that the courts are forcing us to sell in order to split the assets. Do I have to pay capital gain taxes on these rental houses?
2007-05-01 07:33:34 · 7 answers · asked by Sharon V 1 in Business & Finance ➔ Taxes ➔ United States
Probably. If you haven't already signed sales contracts on the homes, it might be possible to set up a 1031 exchange to re-invest your portion of the gain, and avoid taxes on that part. As far as who pays taxes on the ex's portion of the gain - it is dependent on what the divorce settlement says - are you supposed to give your ex net profits after taxes, or gross profits, along with the tax liablity?
2007-05-01 07:55:55 · answer #1 · answered by aj485 5 · 1⤊ 2⤋
If you sell an asset and the sales price is greater than the basis then you have a gain and it is taxable. Long term rate on capital gain is 5% so that is good. Have you considered taking two rentals for yourself at assigned value with consent of court so you don't have a sale? You and ex could each take two and avoid any gains. Have your attorney petition for this change.
2007-05-02 05:26:22 · answer #2 · answered by acmeraven 7 · 0⤊ 0⤋
What you have is called an accounting nightmare. What you are going to have to do is to recapture the depreciation that you showed the years that you filed a joint return, that has to be shown as income and then a capital gain or loss is going to have to be shown and allocated equally. Get you a good CPA and make sure that you have returns from the beginning when you starting showing these homes as rental property on your tax returns. All this work is going to cost you a pretty penny, but in the long run it will be worth it to have it done correctly so you won't have to worry about it anymore.
2007-05-01 09:11:27 · answer #3 · answered by Rooster 1972 5 · 1⤊ 0⤋
If you have multiple properties, the best way may be to split them so that the value is as close to 50/50 as possible. Or split other property unequally so that the total comes close to 50/50. Property transfers incident to a divorce are not taxable to either party. If your spouse wants the cash, he/she can sell it after the transfer and pay the taxes on their own. I hope you are using a good attorney because your situation sounds complex enough that the total transaction could be more expensive than it has to be. You also do not mention if you are in a community property state or not, which could also make a difference.
2007-05-01 13:58:06 · answer #4 · answered by dwagsfive 2 · 0⤊ 0⤋
rgamecock1 (accounting nightmare) will have my vote for Best Answer if I remember to vote. The only thing I can add is that what you pay the accountant is deductible as a tax preparation expense. As long as you have to pay, you may as well claim the deduction.
2007-05-01 11:57:51 · answer #5 · answered by STEVEN F 7 · 0⤊ 0⤋
Yes,
the like kind exchange would be if you trade your rental property for another property, but any money would be taxed.
2007-05-01 10:04:58 · answer #6 · answered by Jo Blo 6 · 0⤊ 0⤋
You certainly do.
Your gain will be equal to:
Sale price (less selling expenses)
- any depreciation taken
- any permenant improvement expenses
- original cost basis
2007-05-01 07:53:44 · answer #7 · answered by Anonymous · 0⤊ 1⤋