Jim and Becky own their home and are getting a divorce. They purchased the home twenty years ago for $150,000. The home was recently appraised for $700,000. They remodeled the kitchen five years ago at a cost of $20,000 and put in a new furnace at a cost of $10,000. There is a current mortgage on the home for $300,000.

Jim and Becky realize that the marital home must be sold but can't agree on how and when to sell it. Jim wants to buy Becky out of her share of the home and sell the house on his own after the divorce is final. Becky would like to sell the house immediately while they are still married. Assuming a capital gains tax rate of 15%, a state tax rate of 5%, and selling costs of 6%, calculate the difference in the liquidated value of the home if Jim sells it after the divorce or if they sell it prior to the divorce. Assume the following:

• the selling price will be equal to the appraisal value
• state taxes are applied to the selling price minus the federal capital gains exclusion.

What should the couple do?