The Law Offices of James A. Adams, P.C., L.L.O.
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Capital gains another potential divorce tax consequence

A previous post on this blog talked about how dads in the Omaha area may obtain through a family court the right to claim their children on their tax returns, even if they do not have the children in their care most of the time. This is just one of many areas in which taxes touch on the subject of divorce and, for that matter, any sort of separation in which an individual is trying to untangle his or her financial and personal affairs from an estranged spouse or long-term partner.

In almost all divorce cases, but particularly in a high-asset divorce or separation, individuals should carefully examine all of the tax consequences that his or her decisions may have. Tax laws change frequently and are complicated to understand, especially in a time that is already stressful. Still, a mistake on a tax issue can cost a person thousands of dollars. This is why it is a good idea to speak both with a family law attorney and, as necessary, an accountant about tax issues before proceeding with a divorce.

Another example of a tax issue that may have a bearing in a divorce is that of capital gains taxes. To generalize, the federal government taxes people on the investment gains from which they profit, whether that investment is stock, real estate, a share in a privately held business, or even interest from the bank or as the result of a promissory note.

Typically, transferring investments between spouses during a divorce is not a taxable event. However, it is important to remember that if one takes on an investment, he or she may wind up paying for it later. For instance, an individual may be able to get a $200,000 rental home bought for $100,000 without tax consequences, but he or she will pay if he later sells the home for $300,000.

These issues can be quite complicated and often require forethought in order to avoid unwanted consequence. For this reason, those considering divorce should consider consulting with a skilled family law attorney before proceeding with marriage dissolution.

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The Law Offices of James A. Adams, P.C., L.L.O.
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