Does this transaction need to be declared as a "sale of property" by myself? I still live in the principle residence. Spouse has been removed from the deed.
This wouldn’t be a sale of property for you, if you bought your spouse’s share of the property. For her it would be a sale/disposition, but for you it would be a purchase. So, you don’t need to report it on your tax return, at least not until you do actually sell the property.
Legal fees and transfer taxes for a purchase generally aren’t claimable unless you are using the property to earn income, or you are claiming moving expenses. You can subtract them from your adjusted cost based when you sell the property, though.