Husband required to buy out ex-wife's portion of house, HELP !

[Guest bjschiedel]

Employee divorced 2 years ago (no QDRO that client is aware of).

He is required to buy out his ex-wife's half of the house.

He needs to refinance to do so and needs additional monies.

Is this considered purchase of primary residence or no? Title will transfer from his and his wife's name to his name only.

I am assuming this would be purchase of primary residence, the fact that he is buying the other half of a house that he already owns half of seems irrelevant.

Any input would be greatly appreciated.

[Guest beppie_stark]

We have permitted similar facts to support hardship withdrawals for the purchase of a primary residence. A consistent and documented approval process can be key in supporting the administrator's decision.

[Ron Snyder]

You are apparently looking for a hardship. With Beppie, I would liberally interpret the hardship language and permit it.

Clearly he couldn't use his qualified plan to purchase the residence without violating the prohibited transaction rules. However, he might consider taking a participant loan from the plan up to $50,000 or 50%. Such a loan could be secured by the primary residence and repaid over a period greater than 5 years, with tax-deductible interest being repaid to his own account.

[GBurns]

Although he is purchasing the ex-wife's half, that does not mean that this property will be his primary residence or even his residence. He could have been removed from the property over 2 years ago prior to the divorce (under a restraining order etc) and might have purchased other property as residence or otherwise established primary residence elsewhere. Whether he will occupy this property as primary residence should not be just assumed, ascertain the facts first.

[E as in ERISA]

See Q. 19 at http://www.abanet.org/jceb/2004/qa04irs.pdf

[stephen]

Thank You Katherine for the definitive answer (and the great link)!