Taxes and Divorce

Whenever money is being transferred there is a possibility of taxes.  Perhaps there is no bigger transfer than the transfer of assets and income during divorce.  Therefore, taxes and divorce must be considered together when negotiating and finalizing a dissolution of marriage. Tax Implications of Transferring Property In Divorce Any transfer of property pursuant to a settlement of a divorce is not considered either a gift or income for tax purposes.  26 U.S.C. Sec. 1041(a)(2).  That transfer has to happen within three years of the divorce however to remain untaxable. 26 U.S.C. Sec. 2516. This means it is usually in the parties’ interests to transfer property in lieu of some other taxable transfer like alimony or maintenance (see below). Taxes Owed After Divorce If either or both of the members of the divorcing couple owe taxes, that tax debt is a marital debt and is therefore divisible in the divorce. A good divorce lawyer will recognize that tax debt…

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