Disposition of Principal Residence
What happens to a jointly-owned principal residence is usually a key item in a divorce agreement. The three most frequent provisions chosen are:
(1) sell the house and divide the proceeds with each spouse reporting his or her share of the sale on separate returns;
(2) transfer the house to one spouse or the other;
(3) retain joint ownership allowing the custodial parent to reside therein but delay the sale of the house until the occurrence of a specific event (remarriage of the custodial parent, children reaching specific ages, etc.).