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Potential tax consequences in a high asset divorce

When a couple with a large number of assets in New York does their taxes, it can be a very complicated process. The couple may have many types of assets and therefore many different forms may need to be filled out to determine how much tax will be paid on the various gains over the year. Ensuring that the couple realizes all the proper tax breaks and understands the tax consequences is important.

Just like understanding the tax consequences is important while a couple is married, it is just as important during a high-asset divorce. One issue is making sure that the couple understands that when they transfer assets, if the asset is transferred to a business or trust as opposed to the other spouse, the couple may need to pay taxes on it.

Another is understanding the potential capital gains on stocks. If the couple buys stock in a company at two different times, the purchase price may be different. When the couple divorces all the stock may have the same value, but the stock purchased at a lower price will have higher capital gains when sold. This means if one spouse who ends up with those will pay more taxes and in the end they will have less money when they sell the stock.

Couples will also have to pay attention to capital losses and net operating losses of businesses. This can be a very complicated area of the tax code. The reason it is important to understand these though is because the losses can be applied to different tax years. This can give one spouse major tax breaks later on if they are not properly dealt with during the divorce.

There are many couples in New York who divorce with many assets. There are many potential tax consequences that the couple will need to be aware of as they split the assets. This is just general information though and not legal advice. Experienced attorneys understand these various tax consequences and may be able to guide one through the process.

Source:, "Avoiding tax traps in high-asset cases" David Sarif and Laurie Dyke, Oct. 14, 2015

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