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by CareyBot

DEAR BOB: My sister-in-law and her husband recently got a legal separation. He wants to keep the house they have shared for more than 20 years because he grew up in that house. The court order says he has to pay my sister-in-law $40,000 for her share of the house within three months. Will she have to pay a capital gains tax on this amount? She doesn't plan to buy another house but will rent an apartment – Kathy T. DEAR KATHY: That $40,000 payment to buy out your sister-in-law's share of the marital home is tax-free for several reasons under federal tax law. Most states have similar conforming tax rules. Purchase Bob Bruss reports online. The transfer you describe is a marital title transfer. Such transfers during the marriage, or as part of a divorce or separation, are tax-free un...