A previous post talked about how a resident of Dayton, Ohio, should think long and hard about fighting for the marital residence. One of the concerns that post mentioned was whether or not the person wanting to keep the house can afford taxes.
Indeed, taxes should be a consideration in just about any divorce or separation involving a significant number of investment assets. With certain key exceptions, most investments are subject to what is called a capital gains tax.
In other words, a person has to pay taxes on the net profit he or she makes from buying, and then selling, any investment, whether it be stock, real estate or even something less common, like a stamp collection or a piece of art.
In general, transferring property to one’s former spouse as part of a divorce is exempt from capital gains tax. While the details should be reviewed with a qualified attorney, this basically that, for example, a person can transfer, or receive, a house worth $500,000 but bought for $300,000 pursuant to a divorce without paying capital gains tax on the $200,000 gain.
However, the person who receives the house must remember that if he or she later goes to sell it, then capital gains tax will apply. This must be factored in to the property division process so people can get a full picture of what their finances will look like years after a divorce or separation is finalized.
Tax considerations are one thing that an Ohio resident should take account of during a divorce or separation with the help of their family law attorneys.