Of all aspects of divorce to quibble over, property distribution has to
be the last thing on the list, considerably because no one wants to have
to divide a house, a dog, a child, a car or the swimming pool. It's
almost as painful as the divorce petition itself, but at the very least,
you can minimize the hurt everyone goes through with these petitions by
considering all the legal ramifications, following the law and utilizing
the expertise of a qualified divorce attorney on your side to make it
as painless as possible.
More importantly, you've
got to watch the ramifications with regard to your taxes, as divorce can drastically
morph your tax expectations in such a way that even the tax practitioner
can't even reverse. This is where a CPA can make all the difference,
examining all marital assets carefully, ensuring fraud prevention, and
determining the best equitable solution from a
tax standpoint. After all, an orderly division of the marital assets doesn't always
mean both parties will benefit tax-wise.
Property distribution, as such – as resultant from considerations
under tax law – revolve around something called "taxable gain"
and "transfer." Simply put, the 'transfer' of a piece
of property from one ex-spouse to the other does not result in either
a recognizable gain or loss for either party. Moreover, a transfer of
property can only be such if the transfer occurs within one year, but
no more than six years, after the marriage actually ended. Additionally,
the transfer has to be pursuant of a divorce or separation instrument.
This would be considered 'taxable gain.'
The concept of 'transfer,' as in
transfer taxes, would only be applicable under court decree, and not necessarily subject
to a "promise" or agreement" between spouses, such as with
gift tax law, as long as the transfer of property was made within a 3-year
period following the divorce. In other words: be sure to consult with
your qualified divorce attorney
and tax attorney about how property distribution may affect your taxes.