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My ex-wife and I bought and lived in a duplex. We eventually divorced and agreed to co-own the duplex where she remained. Later, she moved out and I moved in. (we were always on good terms). A few years later, we agreed that I'd "cash her out" by refinancing in my name only, pulling out some equity and cashing her out. The duplex was never really part of the divorce, only stating that we'd continue to co-own it. If we paid 75k originally and I refinanced for 100k, paying her 25k, can my cost basis now be considered 100K?

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You owned a duplex with a partner.

Cost $75K, $37.5K you, $37.5K partner (as a joint purchase, you co-owned it)

She sold her share to you, at a loss, for $25K.

Your new basis is $62.5

The $100K you borrowed is not part of the math. Didn't the mortgage get paid down a bit during the time you owned it? This feels like a cash-out, and not really relevant to the second purchase of her share.

Edit to address possible oversimplification -

The original purchase price is half yours. You then bought your partner’s remaining half for another price, when you sum these up that’s your total basis.

  • I follow your math. I simplified too much. Original buy was 75k, We did pay it down some but I think it was our 2nd refi at 146k to cash her out at 40k. Going on memory. The refi was a few years after the divorce. I was grasping at possibility that could bring my cost basis up. – Tacoma Tom Apr 5 '18 at 10:34
  • Okay, so if my original half was 37.5k and I cashed her out at 40k, does that make it 77.5k? Or did I really just buy her original 37.5k, and even though I paid her 40k for it, it really just brings me back to the original cost of 75k? Thanks very much for the help! – Tacoma Tom Apr 5 '18 at 11:12
  • I am sticking with the 77.5 per my general math as noted. I recommend waiting for another answer or 2 to confirm. – JTP - Apologise to Monica Apr 5 '18 at 15:10

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