From: Albany NY

Dear TaxMama,

My wife and I are separating.

We will be selling our home. Niether of us plans to purchase another home immediately.

After first and second mortgages are paid off, we should clear about $70K.

Will we be required to pay taxes on that if we don't reinvest within the next year?

What about putting the money into IRAs or other shelters?

Thanks for any help.

Nick

 

 

 

Hi Nick,

Sorry to learn of your misfortune. If you've been living in the house for two years of more, you should have no tax effect whatsoever.

The money will come to you free and clear.

If you've been living there for less than two years, and you're selling the house because of a divorce, you qualify for the 'unforseen circumstances' exception.

Read this article and the one linked to it, for explanation. http://www.taxmama.com/AskTaxMama/307/article3.html

I do hope this helps.

Best Wishes,
Eva Rosenberg, MBA, EA