Divorce and property taxes

D

daedalus

Well-known member
I figure there are at least a couple people on this board who will know the answer to this.

I have a coworker who just recently got legally divorced after several years of separation.  She was the breadwinner.  As part of the settlement, she gets to keep the house on which her and her ex's name are on the title, and she pays him an "equalization" payment for division of assets.

The question is if and how this affects property taxes.  The tax basis now is a good amount lower than market value.

Also, what does it take to remove her ex's name from the title?  She said her RE agent said to file a quit claim deed.  Is that true, and how easy is it to do?

Property is in OC.

TIA!
 
its not just property taxes, but taxes from the IRS as well. the good thing is that since it is under a divorce there is no taxable gain: 

Taxable gain. Under the general rule of Sec. 1041(a), a transfer of property to a former spouse incident to divorce will not cause the recognition of gain or loss. A transfer of property is incident to a divorce if the transfer occurs within one year after the date on which the marriage ceases or is ?related to the cessation of the marriage,? which requires that the transfer:

    Is pursuant to a divorce or separation instrument, and
    Occurs not more than six years after the date on which the marriage ceases.

A divorce or separation instrument includes a modification or an amendment to the decree or instrument (Temp. Regs. Sec. 1.1041-1T(b), Q&A-7).
 
My neighbors divorced back in early 2005.  She got the house and the husband quitclaimed.  She paid half the appreciation to her husband.  But when she sold it later in 2007? she was hit with a capital gain tax (since exclusion was now only $250K instead of $500K) and I remember her complaining that she had to pay capital gain taxes and she didn't factor that or the decline in property value in the divorce settlement.
 
I considered the tax exclusion...but in both cases, the cost basis should include the amount paid out I would think.  So even though my coworker only gets $250k excluded, her cost basis is what they paid for the house, plus what she paid her ex for his share (plus any improvements, etc).  Don't know if that's really the case, but it makes sense.
 
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