Kevin Qualls Family Law
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Divorce, separation may raise capital gains tax issues

Most residents of Orange County probably realize that a couple going through a divorce or legal separation will have to sort through several tax issues when doing so.

For instance, the upcoming change to rules about how alimony gets taxed has been in the news, and couples with children have to figure out who is going to be entitled to the tax breaks one gets on account of having dependents.

Particularly in a high asset divorce or separation, many divorce issues can also arise on account of how dividing up property will affect each person's taxes.

During a divorce itself, parties are generally free to transfer property to one an another without having to worry about paying capital gains taxes. For those who aren't familiar with them, a capital gains tax is an assessment on a persons' investment gain in just about any piece of property that they own. For instance, if a person buys a piece of investment property for a $100,000 and sells it for $200,000, then they owe tax on the $100,000 profit.

While, as mentioned, couples do not have to pay these taxes when dividing property among themselves, either during a divorce or otherwise, they need to be aware that they may have to pay these taxes down the road. So, if a spouse received this same property, bought for $100,000 but worth $200,000, during a divorce and then later sells it for $300,000, he or she owes tax on $200,000.

The bottom line is that a person going through a divorce or separation needs to be aware of whether to what extent they are receiving a potential tax bill along with a piece of property. These sorts of details are generally best discussed with an experienced family law attorney.

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Kevin Qualls Family Law
625 The City Drive South
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Orange, CA 92868
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