10 June 2011 0 Comments

Divorce and taxes

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With divorce come significant tax consequences.  In California, a community property state, all assets are divided up – without any federal income or gift tax consequences.

However, when an asset falls under the tax-free transfer rule, the individual who has that particular asset also takes over its existing tax basis for gain or loss purposes and for the its short-term or long-term holding period.

Tax-free transfer occur either before the divorce is final or when it is final.  This can happen if the transfer took place within one year after the date the marriage ends or within six years after that date – as long as it is mentioned in your divorce agreement.

Tax laws are complex and confusing to understand.  If you are in the middle of a divorce and have questions regarding tax-free transfers, contact an experienced Riverside Family Law attorney who can explain the process to you.

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