How should my ex-wife and I file taxes if we placed profit from our sold home in two trust accounts (one for each child)?

by Paul K. Rudoy, CPA, PFS | Jan 08, 2019
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My ex-wife and I divorced in November 2017. We sold our house in September 2018. We gained $16,000 in profit on the sale, and placed 100 percent of the proceeds in two trust accounts for our two children (one an adult and the other a minor). How do we file taxes for this transaction?

Assuming the home was your primary residence for at least two of the five years prior to the sale, then your profit amount is below the exclusion amount and no tax is owed on the sale of your home.

The amount placed in trust for your children may require you to file a gift tax return, though. If the amount placed into the trusts exceeds $15,000 per person, then you need to file Form 709, United States Gift Tax return. No tax will be due unless the amount of the gift to the trust exceeds $15,000 per person plus $11.18 million, but a Form 709 is required for this type of gift.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Paul K. Rudoy, CPA, PFS, is managing partner of H2R CPA in Pittsburgh, Pa.

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