Question from Suki, Can a House Be Sold to a Husband’s LLC in a Divorce Without Paying Capital Gains Tax in Texas?
Answer from AI:
In general, the transfer of property between spouses or ex-spouses as part of a divorce settlement is not a taxable event under the Internal Revenue Code Section 1041. However, selling a house to an LLC, even one owned by the husband, could potentially trigger capital gains tax.
Property Transfers and Divorce
Under Section 1041 of the Internal Revenue Code, no gain or loss is recognized on a transfer of property from an individual to a spouse or former spouse if the transfer is incident to divorce. This means that, generally, the transfer of the house directly to the husband would not trigger capital gains tax.
Selling to an LLC
However, selling the house to an LLC, even one owned by the husband, is a different situation. The IRS may consider this a sale rather than a transfer, which could potentially trigger capital gains tax. The tax implications can be complex and depend on various factors, including the terms of the divorce settlement, the cost basis of the house, and the selling price.
Capital Gains Tax
If the sale of the house does result in a capital gain, you may still be able to exclude some or all of it from your income. Under Section 121 of the Internal Revenue Code, you can exclude up to $250,000 ($500,000 if married filing jointly) of gain on the sale of your main home if you meet certain criteria.
Consult a Professional
Given the complexity of these issues, it’s strongly recommended that you consult with a tax professional or a family law attorney who is familiar with these matters. They can provide advice based on your specific circumstances and help you understand the potential tax implications.
- Consult a tax professional: They can help you understand the potential tax implications of selling the house to the LLC.
- Consult a family law attorney: They can help you navigate the divorce process and ensure that your interests are protected.
Remember, this information is a general guide and not legal advice. Laws can change, and each situation is unique. Always consult with a professional for advice tailored to your situation.
The answer is written by AI.
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Disclaimer: The information provided in this response is intended for general informational purposes only and should not be considered as legal advice. While we strive to provide accurate information, we make no guarantees regarding the accuracy or legal validity of the information presented. Laws and regulations vary by jurisdiction and can change over time, and the application of laws can vary widely based on the specific facts and circumstances involved. Therefore, you should consult with a qualified legal professional before making any decisions related to legal matters. Do not rely solely on the information provided in this response for any legal decisions. We disclaim any and all liability with respect to actions taken or not taken based on the contents of this response.
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