Any San Antonio resident who has experienced a divorce knows just how difficult it can be. The range of emotions coupled with the seemingly unending list of decisions to be made can be a test to any person. For families with small children, issues about child custody, visitation plans, parental relocation and child support can take center stage. Financial issues concerning property division and asset distribution during a divorce can also have long-lasting effects.
Even when couples have prenuptial agreements that stipulate the division of some assets, additional impacts can be felt in the form of taxes or penalties. A divided retirement account may be subject to federal income tax if the money received from a disbursement is not reinvested into a new form of retirement fund. A recent decision handed down by the United States Tax Court reaffirmed this reality to one woman who attempted to avoid taxes while taking the full distribution.
Other issues can involve capital gains taxes for real property. For multiple decades, the law has allowed the transfer of an asset from one to another spouse or from both spouses to only one spouse without any tax implication at the time of the transfer. However, if the new sole owner eventually sells that asset and yields a profit, then that person is responsible for applicable taxes at that time.
With so many potential opportunities to lose more than necessary, it can be helpful for divorcing people to work with legal professionals all through the process. Getting information can help make the best decisions possible during a difficult time.
Source: Forbes, “Nonrecognition On Divorce Transfers Hurts Receiving Spouse,” Peter J. Reilly, May 7, 2014