Tax Implications of Dividing Assets in Atlanta

When assets are divided based on an equitable division of property, they are non-taxable events in and of themselves. However, there are some things to look out for if a claimant has a brokerage account. They should make sure the assets, stocks, and bonds held within the brokerage account are divided in a pro rata representative tax neutral basis. Doing so prevents one party from getting all the low-basis stock and requires them to pay more in capital gains when they sell it, while the other spouse avoids the capital gains. An experienced property division attorney should make sure that the tax effect is equal on both sides, or as close as possible.

If someone has an investment property or rental home that is going to be sold, they should ensure that it is a 1031 exchange, so the gains are not taxed. The proceeds of a sale can be divided into new investment properties. An individual must be cautious when selling an investment property, though. A claimant should make sure the monies go into another investment property, even though they are going to be divided. For more information about tax implications of dividing assets in Atlanta, contact a lawyer today.

Property Division and Taxes

Tax implications of dividing assets in Atlanta may involve capital gains taxes when it is real property. Investment properties and dividing stock options have either ordinary income tax or capital gains taxes depending on the types of units being divided. One party would have 50 percent interest when the other invests and exercises stock options. The former may be at a lower tax bracket, but the latter must pay taxes on the options that are exercised because they are in their name.

An investor’s legal representation must take into account that the other party will get the net after-tax dollar amount after exercising the options, but the taxes will be set at the investor’s tax rate and not the other party’s. If the other party does not work outside the home and does not have much taxable income, a knowledgeable attorney should make sure that they do not get a higher net as well as that the investor has a higher tax bill. With capital gains taxes, it is important to divide a brokerage account on a tax neutral basis so that one party does not have more taxes than the other.

Increase or Decrease of Property Value

There are no tax implications of dividing assets in Atlanta when the value increases or decreases due to either party’s efforts. It does not change any aspect of divorce litigation. A skilled lawyer could argue that one party caused a higher tax burden because of something they did and should be responsible for that. They cannot allocate all the tax burden to one party and give the other the subsequent benefits. Usually, all of this is taken into consideration and equaled out.

Evaluation of a Privately Held Business

When valuing a privately held business, the tax implications are not taken into account when dividing assets in Atlanta. A seasoned attorney could argue for consideration of those implications if they represent the spouse that has an ownership interest, but they usually do not apply when dealing with the gross value of an entity. Sometimes it makes sense to tax impact it, but other times it does not. These considerations largely depend on individual circumstances.

For more information about tax implications of dividing assets in Atlanta, contact an accomplished lawyer.