Posts Tagged ‘irs’
Know the Facts Before Agreeing to Buy Out Your Ex-Spouse
A lack of buyer’s in the housing market is making things tougher on divorcing couples. Sadly, many people are stuck, unable to find a buyer for their co-owned property. While one solution may be for one spouse to buy out the other, please take the time to understand the consequences and future liability. If not, you may end up paying the ex much more than you planned.
Things to Know Before You Buy Property From Your Spouse or Ex
Internal Revenue Code 1041: Section 1041 states that gains or losses are NOT recognized by the IRS on transfers between spouses during marriage, or on transfer’s between ex’s, if the transfer was a part of the divorce settlement.
For example, if you agree to pay the ‘ex’, or to ’ex’ to be, $200,000 for their equity in your co-owned property, the cost basis of the property will not increase. If you sell in the future, you will pay income taxes based upon the original cost basis of the property, excluding your $200,000 payment.
State Taxes: Many states do not recognize gains or losses on property transfer’s to spouses or ex’s. Check on the tax consequences about a future sale before making an offer.
Real Estate Fee’s and Transaction Costs: Take into consideration what the costs of the sale would be. Calculate what each of you would expect to receive (net) today, after paying real estate commissions, repairs and closing costs in order to determine a fair purchase price.
Summary: When determining the value of co-owned, marital property, consider that the spouse who is buying will effectively pay the selling costs, along with the federal and state income taxes, on the other’s share, so account for it. And remember, it is always advisable to seek the council of a tax professional when discussing issues dealing with real property.
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IRS Tax Relief Help for 2009
The IRS is offering some much needed tax help in 2009. The Tax Relief Programs, which address real estate matters are outlined below.
- 1. First Time Homebuyer Tax Credit: People who recently bought a home or those who are considering buying one should pay close attention. The program, which could be worth $7500 to those qualified, defines “first time buyer” as anyone who has not owned a primary residence in the past three years. If this is you, check out the IRS program details.
- Offers in Compromise on Home Values: An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS. An OIC is a viable option for taxpayers experiencing money difficulties, as the agreement settles a tax debt for less than the full amount owed. Under IOC guidelines, the IRS realizes that real estate valuations may not be accurate. In instances of financial hardship, where the accuracy of local real estate values are in question, the IRS will give a new review of the information before determining their final offer.
- Real Estate Tax Deduction: Taxpayers can claim an additional standard deduction, based on state and local real estate taxes paid in 2008. The maximum deduction is $500 per person or $1000 for joint filers.
- Workouts and Foreclosures: For most homeowners, debt forgivenness is now tax free. Homeowners can exclude forgiven debt on their principal residence if their loan was for owe less than $2,000,000. The limit is $1 million for individuals and married couples filing separately.
Thank you for visiting InfoTube.net homes for sale or rent website. If you are interested in more information, consult your tax planner or visit www.irs.gov.