CDA Real Estate & Asset Division 2

Question 1

A couple divorces mid-year. For federal tax purposes, what is the treatment of a home sale that qualifies for the Section 121 exclusion?

Accepted Answer

Each spouse can exclude up to $250,000 of gain if they each meet ownership and use tests

Answer

Under IRC Section 121, each spouse may exclude up to $250,000 of gain on a principal residence sale if they individually satisfy the 2-of-5-year ownership and use requirements.

Question 2

What does a 'lis pendens' recorded against marital real property signal to a potential buyer?

Accepted Answer

Litigation is pending that may affect title to the property

Answer

A lis pendens is a recorded notice that a lawsuit affecting title or ownership of the property is pending, warning buyers and lenders of the cloud on title.

Question 3

In a divorce, spouse A is awarded the marital home but cannot refinance solely in their name. What risk does spouse B face if left on the mortgage?

Accepted Answer

Spouse B remains liable for the debt if spouse A defaults

Answer

A divorce decree does not release a co-borrower from mortgage liability; if the spouse awarded the home defaults, the lender can still pursue the non-occupying spouse.

Question 4

What is the primary purpose of an Interspousal Transfer Deed in a California divorce?

Accepted Answer

To transfer property between spouses without triggering a reassessment for property tax purposes

Answer

An Interspousal Transfer Deed in California conveys real property between spouses and qualifies for a property tax reassessment exclusion under Proposition 19 (formerly Proposition 58).

Question 5

During divorce proceedings, one spouse secretly transfers marital real property to a third party for below-market value. What legal remedy is typically available?

Accepted Answer

The court can void the transfer as a fraudulent conveyance

Answer

Courts can set aside or void transfers of marital property made to defraud a spouse under fraudulent conveyance statutes and equitable distribution principles.

(CDA) Certified Divorce Advisor Practice Test

(CDA) Certified Divorce Advisor Practice Test

CDA Real Estate & Asset Division 2