Utah Woman Receives $225K Tax-Free Divorce Buyout; IRS Rules May Shift Future Tax Burden to Ex-Husband
A Utah woman is receiving a tax-free $225,000 payment from her ex-husband as part of a divorce settlement for buying out his share in their jointly owned home. Under IRS Section 1041, such transfers between spouses during a divorce are not taxable events, meaning the recipient does not owe capital gains on the check. However, this arrangement shifts future tax liability to the spouse who retains ownership of the house. The property has appreciated by approximately $450,000 over eight years and is now held with the original cost basis. When she eventually sells it, only a single-filer exclusion of up to $250,000 will apply—compared to the married couple’s combined $500,000 exemption—which could result in a federal tax bill between $30,000 and $40,000. Experts suggest that selling jointly before finalizing divorce proceedings may be more advantageous for couples with large home gains. This preserves the full exclusion amount and can reduce overall taxes owed.
Topics: capital gains divorce IRS Section 1041 real estate buyout