Spouses need to be cautious that they are not overlooking tax assets in divorce proceedings where marital or community property will be divided. Tax assets and liabilities may be less obvious than houses, cars and furniture, but often they are just as valuable. An experienced family lawyer can identify tax assets and ensure that they are considered in […]
When marital property (or community property) is divided in divorce by equitable distribution, the transfers of property between spouses may be tax-exempt if the legal requirements are met. Under I.R.C. §1041 no gain or loss is recognized on a transfer of property between spouses or former spouses if the transfer is made incident to a divorce. Chapter 2 of Frumkes & Vertz on Divorce Taxation contains a detailed analysis of tax law affecting equitable distribution, including property transfers, tax basis, sale of a residence, interest on installment payments, and marital assets that arise from income tax returns, such as carryforwards, tax credits and tax refunds.
Can a divorce court pierce spendthrift trusts that were established to protect family assets from equitable distribution obligations? A recent opinion from a state appellate court provides a surprising answer. While the decision is not precedential in Western Pennsylvania (where I represent clients in family law matters), it may signal a shift in the perspectives of the family […]
Frumkes & Vertz on Divorce Taxation §13.12 Qualified Domestic Relations Order Checklist Does the court-issued order clearly appear to relate to the allowance of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a participant? Does the order clearly appear to be made according to a […]
When stock options are assigned to a former spouse as part of a divorce settlement, the transferee who receives the options is responsible for paying the tax when they are exercised. See Frumkes & Vertz, Divorce Taxation 2.1.3; Rev.Rul.2002-22. The taxable income resulting from the exercise of stock options is taxed as ordinary income, not capital […]
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