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

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.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.