Tax Implications of Dividing Assets in Albany
Divorce proceedings are already emotional and difficult as it is. Thinking about the tax implications of dividing assets just adds another layer of concern to a person in Albany. Fortunately, there are professionals available to explain these complicated laws and give you peace of mind during a challenging time in your life. A compassionate asset division attorney could help you through the process and ensure you have received an equitable share of your marital property.
Is Property Taxed When Transferred Between Divorcing Spouses?
Generally speaking, there is a section in the Internal Revenue Code that deems asset transfers stemming from a divorce to be tax-free. If the transaction does not meet the Internal Revenue Code 1041 for property transfers, then it would be subject to income or gift taxes.
The Kinds of Taxes Involved in Property Division
Each asset division in Albany can come with a different tax implication. Retirement assets earned from an employer plan, for example, can be split under what is called a qualified domestic relations order (QDRO). The divorce is considered a qualifying event that shields any tax liabilities for the spouse who acquires this specific asset.
Similarly, any transfer of real property, whether it is through a quitclaim deed or through some other method, could be made under IRC 1041, which is a transfer incident to divorce.
At some point in the future, when the person decides to dispose of the property through sale, there will likely be tax consequences. One example is the recognition of gain or loss that the spouse who gains the property in a divorce might need to consider.
If any material property is a transfer incident to divorce (as qualified under the Internal Revenue Code) then there are likely no tax implications for that specific transfer. It is recommended that couples list any notable material property in either a prenuptial agreement or a postnuptial agreement ahead of time, to reduce the amount of stress and tension if a divorce occurs.
There should be no immediate tax implications during the transfer of property. It gets more complicated when it comes to how to file taxes or how to claim itemized deductions like property credits or children on taxes. Implications would largely depend on what time of year the divorce was finalized, what the equitable distribution of property was, and who the assets went to. A nearby lawyer could help someone consider the tax implications of their itemized deductions when dividing assets after a divorce.
Identifying as Married for Tax Purposes
A tax professional could often figure out what the most financially beneficial option is for the parties at the time of filing. If a newly-divorced couple was married for a requisite period of time during the previous tax year, it may be in their financial interest to file for one more year as being married. That might mean they must construct an agreement as to how to divide whatever tax refund they are entitled to for that filing season, then move forward with a clean slate in their first full year out of their marriage.
Consult with an Attorney About the Tax Implications of Dividing Assets in Albany
There are a number of assets in a divorce that are not subject to taxation, which should greatly reduce the stress of the ordeal. Lawyers are available to explain the tax implications of dividing assets in Albany and could act as your guide through the property division process. To learn more information, please call now.