Can I Deduct a Loss on a Property Given to My Ex-Husband?
Original post by Cindy Quarters of Demand Media
When you get a divorce, all the marital property is normally dealt with by the divorce decree. What you give to your ex-husband and how it is handled financially should all be laid out in the final divorce papers. Normally there are no losses or gains allowed on the transfer of property between you and an ex-spouse, though there are exceptions to this rule. You may also find that your state and the IRS have different statutes that apply in this situation, requiring you to report the property differently on your state taxes than you do for your federal filing.
The IRS considers that property transferred between spouses as a result of a divorce decree, or within a year after the divorce is final, is neutral in terms of gains and losses. This means that any property you give to your husband, or that he gives to you, is not reported as either a profit or a loss, regardless of the value of the property prior to and at the time of the transfer. It is considered a gift rather than a sale or exchange.
In some limited situations the IRS may say that gains and losses on property transferred between divorced spouses should be reported. The first of these is if your ex-husband is a nonresident alien. The second is when the property is transferred in trust, which requires that you report any losses or gains if the liabilities on the property exceed or are less than its adjusted basis.
Each state has its own rules about how property transfers are to be dealt with between ex-spouses. Many states follow IRS rules for transfer of property, but some do not. How you report the property transfer may depend on who owned the property going into the marriage or what type of property it is. Check with your state's Department of Revenue or with your divorce attorney for specific details regarding how your state handles any transfers between previously married people.
Gains or Losses on Income Property
If the property you transfer is income-producing, you must declare all gains or losses from the property on your income taxes for the year in which it was transferred. You should only report the amounts that apply to the property until such time when you transfer it to your ex-husband. He is responsible for reporting on the property for the rest of the year. You cannot report the transfer of the property itself as a loss.
- IRS: Sale of Property: Transfers Between Spouses
- IRS: Gain or Loss: Transfers to Spouse
- Divorce Source: New York State Divorce Laws: Property Distribution
- IRS: Publication 504: Divorced or Separated Individuals
About the Author
Cindy Quarters has been writing professionally since 1984, creating both user manuals and training documentation. She also writes travel, pet and gardening articles, with work published in "Radiance Magazine" and the "AKC Gazette." Quarters earned a Bachelor of Arts in English from Washington State University, as well as a master's degree in management information systems from West Coast University.
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