This is the exact thing that happened to my clients just
before their divorce was final. They even lived in separate
states. They filed jointly because his business losses
reduced their taxes so they could get her withholding
refunded. She lived in the house and he remained on the
title. When she sold the house, they filed a joint return
claiming the full $500,000 exclusion and she bought a new
house with the proceeds as agreed in the divorce. Divorce
was final in the following year. He didn=92t have to live in
the sold house but could use his wife=92s residence in it as
his own, so full exclusion.

Linda Dorfmont E.A., CFP, CSA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It may not be relied upon for the purpose of avoiding > << penalties that may be imposed on the taxpayer or the > << tax preparer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

There is no need for a trust. Internal Revenue Code section
121(d)(3)(B) says the clock for use of the residence never
starts running on the "out-spouse" as long as the
"in-spouse" is using the home pursuant to a written
instrument. Ownership is still evaluated in the same manner
so there should be no transfer of title. In addition, under
the California Family Code, the rental value of the
residence may be taken into account as an adjustment in the
calculation of support under some circumstances.

Timothy E. Kelly
Certified Specialist, Taxation Law
State Bar of California
Board of Legal Specialization

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It may not be relied upon for the purpose of avoiding > << penalties that may be imposed on the taxpayer or the > << tax preparer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

"AES" <siegman[at]stanford.edu> wrote:

- quote -

The trust won't interefere with each owner's $250,000 gain
exemption as far as the ownership test is concerned. The
use test clock will start ticking for the spouse who moves
out when (s)he moves.

Phil Marti
Clarksburg, MD

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It may not be relied upon for the purpose of avoiding > << penalties that may be imposed on the taxpayer or the > << tax preparer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

<< General Disclaimer: > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << It cannot be used by any taxpayer for the purpose of > << avoiding penalties that may be imposed on the taxpayer. > << ================================================== ===== >
California couple, community property house, divorce on the
horizon.

If they were to put the house into a mutually established
revocable trust for a few years (to permit the kids to stay
in it with one parent until they're out of high school),
then sell, could each of them take their half of the
residential capital gain reduction on their separate returns
at that time?

(Purpose of the trust is just to park the house in a holding
arrangement that's clearly defined and run by a neutral
trustee, avoid potential conflicts during the holding
period, sell and split equities at the end.)

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << Copyright (2005) - All rights reserved > << ------------------------------------------------->