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
to a divorce or separation instrument. This would be considered 'taxable
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 three-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.