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» From: Wuerzburg, Germany Dear TaxMama, In my divorce, I relinquished all rights to a home (in Virginia) I jointly owned with my now ex-wife. Soon thereafter, I was forced to file for bankruptcy (Chapter 7). Now my ex-wife is selling the home under an HUD-1 Settlement (for some $50,000 more than its market value last year), and I have been asked to sign an almost completely blank (save for my name) 1099S. Is this something you would advise against? What would be the tax ramifications for me, if any? Thank you! Daniel Dear Daniel, If you signed over title to the house when you got divorced, you should not have to sign anything now. In particular, you don't want to be getting a 1099s or any other kind of 1099, allocating part of the sale to you and to your Social Security number. You may want to have someone draw up a quitclaim deed, if you had not done that before. It is only to be used in the course of the escrow. It would transfer title to your wife, so that she has clear title to sell the house herself. However, once you sign that quitclaim deed, if she doesn't sell the house, and you have not had the lender remove your name from the mortgage, you might find yourself liable for the debt on a property you no longer own. (I could do really dastardly things to you with that kind of power, sadly.) One good thing, though, about the situation. Even if they do issue you this 1099, the truth is, you don't really need to worry. There was a provision in one of the tax reform acts in the 1990s that protected ex-spouses like you. When she sells it, since the gain is less than $500,000, you can each still take advantage of your personal residence exclusion on the property, even though you haven't lived there for a while. Sit down with a good tax pro locally (I am sure someone in the army is resourceful enough to be moonlighting doing taxes). Have them review the papers to see if you did any damage to your personal residence exclusion when you "relinquished all rights to" that home. Best wishes Eva Rosenberg Your TaxMama  |
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