RR Reed
Level 3
‎10-04-2021 12:10 PM

I have two clients who co-own 3 rental properties 50/50 (originally were MFJ, but divorced along the way and split ownership half ways). In late 2020, they decided to split properties as 2 and 1 (ex wife got 2 bldgs and ex husband got 1) by just removing their names from the respective titles of property. this sounds like Quit claim deed to me as there was no exchange of money. I am learning from online research I may have to file form 709 for each of them. Is that correct and how do I adjust tax basis in the asset worksheet for the property received? And how do I dispose the property given away?

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BobKamman
Level 15
‎10-04-2021 12:15 PM

Looks like a sale to me. 

Edited to add:  Might qualify as a 1031 exchange.  

RR Reed
Level 3
‎10-04-2021 12:53 PM

Sale would make it a taxable transaction and account for it like a regular sale. What about the online literature where some websites call for Form 709? Any thoughts?

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TaxGuyBill
Level 15
‎10-04-2021 01:00 PM

A 709 is for a Gift.  This was not a gift.  They TRADED their 50% ownership for some ownership in another property.  That is a sale.

But as Bob pointed it, it may qualify as a 1031 Exchange.

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sjrcpa
Level 15
‎10-04-2021 01:15 PM

Was this done pursuant to the marital property settlement agreement?


The more I know the more I don’t know.
Terry53029
Level 15
Level 15
‎10-04-2021 01:17 PM

Not sure, but would section 1041 be applicably

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RR Reed
Level 3
‎10-04-2021 01:45 PM

No, they divorced/separated long time ago

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Terry53029
Level 15
Level 15
‎10-04-2021 02:13 PM

If divorced a long time I would look into 1031 exchange as @BobKamman suggested, doesn't sound like a gift is involved 

RR Reed
Level 3
‎10-04-2021 02:18 PM

Thank you all for your inputs! I will look into 1031 exchange.

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