Tax Consequences of Equitable Distribution Awards

Post-separation property transfers between spouses are considered “incident to divorce” and are generally not subject to taxes by the Internal Revenue Service.  However, if the transfers take place a year or more after the separation, there is a presumption that the transfer was not incident to the separation and consequently the transfer becomes taxable.  This presumption can be rebutted with evidence that the transfer did it fact occur as part of a property division incident to a separation. This evidence is often in the form of a court order or a signed contract between the parties.  Guidance from experienced attorneys will help ensure that your property division is not subject to taxation.