Thread: Asset splitting
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Old 09-12-2013, 10:19 AM
FB_ FB_ is offline
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That's a very interesting question.

Technically he bought you out of a property. So technically you sold. If the proceeds you received from your half was more than the cost of your half, then yes I would say it was income.

The thing is when someone normally buys someone out of a house this is not income because it's where you live. This is different because tax law states that sale of your residents is not a taxable event. However, say you owned a cottage and had to sell it to equalize then the government would want the capital gains on this. Therefore both of you would have capital gains. Although they would end up being the same amount so technically they would negate each other for support purposes.

You sound like you want the sale to be income for him but not you.

So lets say you guys together paid $250,000 for a property during marriage.

At divorce the property was sold for $500,000.

The net gain (Capital Gain) was $250,000.

$125,000 would be your gain and $125,000 would be his gain. This should end up on both your income taxes.

Now lets say he just bought you out. He paid you (thus purchased) your half for $250,000. Your gain would still be $125,000. He would not have a gain because he didn't sell anything.

So this $125,000 should appear on your income. He wouldn't have to put anything on his income until he sold the property.

It would look like this

Buy 1: $125,000 (50% of $250,000)
Buy 2: $250,000 (What he paid you)

His total Cost: $375,000.

If he did sell it for $500,000 his gain would be $125,000 at the date of sale.

If he sold it for $600,000 his gain would be $225,000 ($600,000 - $375,000).

Hope that helps.

Last edited by FB_; 09-12-2013 at 10:23 AM. Reason: clarification
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