The 1997 revised tax law says we can no longer roll over capital gain in the family home. The one-time exclusion of $125,000 is also gone. Instead, we have somthing even better. Now, each spouse can take up to $250000 exclusion if they have lived in the house two of the past five years.
If your house has a very large capital gain, you should consult with a CPA or a financial divorce professional to see how to handle this the best way. It is possible for both spouses to take the $250,000 exlcusion for a total of $500,000 if it is handled properly.
Also, because so many times the wife gets the house and then finds she can't afford to keep it, the capital gains issue should definitely be addressed before the final settlement is agreed upon.
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