Divorcing Business Owners Should Pay Attention to the Tax Consequences

If you’re getting a divorce, you know the process is generally filled with stress. But if you’re a business owner, tax issues can complicate matters even more. Your business ownership interest is one of your biggest personal assets and in many cases, your marital property will include all or part of it. Transferring property tax-free In general, you can divide most assets, including cash and business ownership interests, between you and your soon-to-be ex-spouse without any federal income or gift tax consequences. When an asset falls under this tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis (for tax gain or loss purposes) and its existing holding period (for short-term or long-term holding period purposes). For example, let’s say that under the...

When Divorcing Business Owners Minimize Profits

Dividing a marital estate is rarely easy. But it’s made much harder if a divorcing spouse owns a private business and attempts to artificially deflate its profits or hide assets. If you or your attorney suspects this type of deception, engage a forensic accountant to investigate. Key questions When working on divorce cases, fraud experts ask several questions about private business interests. For example, does a spouse own a cash business that may have unreported income? Does the owner receive special (or excessive) perks or tax write-offs that affect the business’s profitability? Are numbers intentionally reported incorrectly to affect the business’s value? n addition, experts investigate whether the company has any subsidiaries or is part of any other business ventures. Sometimes, a business owner may be a silent...

Divorcing Business Owners

Taxation of divorcing business owners add complications to an already stressful time. Your marital property will include all or part of your business ownership interest . . . one of your biggest personal assets. Transferring property tax-free You and your ex-spouse can generally divide most assets, without any federal income or gift tax consequences.  When an asset falls under this tax-free transfer rule, the spouse who receives the asset takes over its existing tax basis (for tax gain or loss purposes).  The receiving spouse also takes over the asset's existing holding period (for short-term or long-term holding period purposes). Example Under the terms of your divorce agreement, you give your house to your spouse in exchange for keeping 100% of the stock in your business. That asset swap would...