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Capital gains in real estate splitsville

Can divorcee claim $250,000 home-sale tax exemption?

DEAR BOB: My wife and I separated in April 2003. She moved out and rented a house. We filed for divorce in May 2004. The divorce will be final in January 2005. We own a house together. It is my principal residence where I live with one of our children. The house has appreciated in market value at least $400,000 since we bought it together. The divorce agreement says when the house is sold, within the next five years, the net sales proceeds will be divided 50-50. How far ahead can we sell the house and still both be entitled to claim that $250,000 tax exemption? – Vic S. DEAR VIC: There is no time limit for the Internal Revenue Code 121 principal residence sale tax exemption in a divorce situation. Many divorce agreements specify the family home shall be sold when the youngest child becomes 18 (or 21). Purchase Bob Bruss reports online. As long as the "in spouse" living in the home (that's you) qualifies for the IRC 121 exemption (principal residence ownership and occupancy for a...