When a couple gets divorced, their top priorities may be related to child custody and alimony. However, those who are going through a divorce should not forget about potential tax issues related to their split. In some cases, it may be necessary to determine who gets to claim a child on a tax return or how to account for property transfers.
For instance, if an individual transfers stock to the other spouse as part of a property settlement, the recipient may incur a capital gain when the stock is later sold, even if it is sold immediately. This is because the spouse who receives the asset would have the same basis as the person who bought the stock. In the past, the person receiving the stock would have received a step-up in basis to its value on the date of receipt.
To rectify this issue, the person receiving an appreciated asset may ask that he or she be reimbursed for any taxes paid. Another idea may be to ask that the asset be given a value that reflects its worth after taxes are paid. This may enable the two sides to come to a reasonable settlement on the issue in a more timely manner.
A person who is facing the end of a marriage and who is struggling with how to resolve property division issues with respect to complex and high value assets may wish to talk to an attorney who has experience in family law matters. The division of assets is often a contentious part of divorce proceedings, and an attorney can often assist in negotiating a settlement agreement that protects the client.
