The client states that he and his wife have agreed to an equitable division of marital property, with each party receiving assets valued at $1,050,000. The client and his wife have decided that the woman will get the value of $500,000 and the savings bonds of $50,000. Your client keeps $50,000 in bank accounts and investment accounts, but pays $500,000 to offset the asset allocation. He wants you to prepare the agreement. In the preliminary review of the plan, you accept that it appears to be a uniform allocation. However, there are tax issues that need to be taken into account in the distribution, which the client has clearly not taken into account and which will make a disproportionate distribution of them. The question then is, section 212 allows a divorce lawyer to deduct the legal fees paid in connection with divorce, child support and child care facilities? A few weeks ago, I wrote how a provision that should encourage companies to invest in equipment was also a huge tax break for entrepreneurs interested in buying a private plane. The revised tax law has also surprised couples going through a divorce, to the point where lawyers and financial advisors suggest that their wealthier clients put accountants in the mix to determine the tax impact of ancestal strategies. As the cases show, divorce agreements must be carefully developed to meet the client`s true intent and avoid unnecessary tax effects. Therefore, if you are asked to design an agreement with a deadline for submission, you should carefully review Section 71 and the case law to ensure that you meet the bid criteria. Be sure to indicate that L`Aalimony is paid following an impending separation and divorce. Ensure that the amount payable is „dependant“ to the recipient and therefore included in the income of the spouse`s beneficiary and that the payments are tax deductible for the payer.
Let your client understand that only payments made after the physical separation of the parties are considered supports. The agreement must also be clear that the guarantee ends with the death of the beneficiary spouse. On the other hand, the foster spouse, who allegedly paid $15,416 in taxes in a divorce last year, was able to maintain all of the $100,000 in exemption this year. Rev. Mr. Rul. 1987-112 investigating the distribution of savings bonds on divorce. These include the relationship between item 61 (a) with respect to gross income; Section 454 relates to discount commitments; And section 1041. À Rul. 1987-112 states that „although Section 1041 (a) of the Code protects against recognition gains that would normally be recognized in a sale or exchange of property, it does not protect against the recognition income normally recognized when that income is transferred to another subject. Since the disputed incomes are accrued but unrecognized interest and are not profits, Section 1041, point a), does not protect that income from recognition.  If, in our example, the client did not collect the deferred interest on the savings bonds as a product for each year in which he held the bonds, that unaccounted-for profit will be considered income for which the Client must pay tax at the time of the transfer, regardless of Section 1041.