Question: My wife and I are in the process of getting a divorce. We are selling our jointly owned home and splitting the proceeds. I plan on buying a condo apartment. Do I have to pay tax on the profit from sale of the home?
Answer: In the event of a divorce or separation and sale of a jointly owned residence, either owner (or both) may qualify for deferral of tax on the gain.
On Form 2119 enter only your share of the total dollars involved -- that is, half of the cost basis, half of the selling expenses, half of the sales price, etc. But enter the full cost of the replacement apartment you are buying in your own name.
The amount of gain on which tax is deferred is based on your independent share of the proceeds from the sale. So if the new residence costs more than your half of the sales price of the old home, tax on your entire share of the gain will be postponed.
Q: About three months after I bought shares in a mutual fund, they distributed a capital gains dividend. Since I owned the shares for less than a year, is thisa short-term gain?
A: No. Capital gains dividends from a mutual fund are always long-term, regardless of how long you have owned the shares.
Do not confuse a capital gains dividend with a capital gain realized if you sold or redeemed the shares. In the latter case, the determination as to long-term or short-term is based on how long you have owned the shares.
Q: About five years ago, I sold some real estate on the installment plan. The taxable income from capital gains has now been reduced from 50 percent to 40 percent -- but the tax form has no place for calculating the 50 percent income from earlier sales. How do I report this?
A: The reduction in the tax rate on long-term capital gains applies to all gains realized during the year -- including those which stem from earlier transactions.
So the capital gains portion of payments received during 1979 qualifies for the new 60 percent exclusion even if the sale itself took place before Nov. 1, 1979 (the date the new rate went into effect).
Just include the capital gain element of all 1979 installment payments on Schedule D along with any other gains and losses. You will then get the benefit of the lower tax base on the old sale -- a benefit that was intentionally included when the law was written.
Q: I own stock in quite a few companies, and often attend the annual stockholders' meetings. What part of my expense is deductible?
A: None of the expenses of attending stockholders' meetings is deductible if you have no other involvement with the company but the ownership of stock.
This is true even if you attend the meeting to get information about the company that might be useful to you in considering additional investments in the company.