If the profit from a property I sell is subject to capital gains, and I am in a mediation contract that requires me to payout 15% of any "profit" on this property (immediately upon sale) to an ex-girlfriend, will I have to pay taxes on the full amount of profit? Can I subtract the amount paid to her in determining my basis?

ANSWER

The BIDaWIZ Team's Answer:

You need to reduce the amount of proceeds from the sale by the 15% you will pay her. Then use that reduced amount to calculate your gain. For instance, you paid $Y for the property. Then, you paid an additional amount $Z, which represents what you paid her, the 15%. So in all you have paid Y + Z for the property, which is your basis. Make sure you keep the documents to support the amount you paid her.