Question

A couple purchased their home 20 years ago for $60,000. They were divorced 10 years ago. The husband received title to the property and has continued to live there. If he sells it this year for $300,000, how much of the profit will be subject to capital gains tax?

Answer 1

To determine the amount of profit subject to capital gains tax, calculate the capital gain as the difference between the selling price and the original purchase price. However, in the case of divorce, the tax basis may be different. Consult a tax professional for accurate information.

Step-by-step explanation:

To determine the amount of profit that will be subject to capital gains tax, we need to calculate the capital gain for the husband. The capital gain is the difference between the selling price and the original purchase price. In this case, the selling price is $300,000 and the original purchase price is $60,000. Therefore, the capital gain is $300,000 - $60,000 = $240,000.

However, since the couple was divorced, it is important to consider the tax laws regarding capital gains in the case of divorce. Generally, when a spouse sells a property received in a divorce settlement, the tax basis of the property is the fair market value at the time of the divorce. This means that the husband's tax basis for the property would be the fair market value on the date of the divorce, not the original purchase price.

Unfortunately, the question does not provide us with the fair market value on the date of the divorce. Therefore, we cannot determine the exact amount of profit that will be subject to capital gains tax. It would be best for the husband to consult with a tax professional to determine his tax liability in this situation.