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Considering taxes when dividing property

Wisconsin presumes that a divorcing couple divides all property, besides gifts or inheritance, in as equal a fashion as possible. But what does equal mean when it comes to potential tax gains?

As Forbes notes, it pays to focus on the cash implications of property division in both the immediate and future sense.

Avoiding untaxed dollars

Though some property appears equal on paper, the context of its value is important. Take stocks for example: At any one point, a business’s stocks hold an equal value. Taxes, though, look at the overall value gain that a stock generates upon its sale, which depends on when spouses purchased it.

A stock that spouses buy early that matures from $40,000 to $100,000 represents a taxable gain of $60,000 — versus the same stock bought later that only matures from $90,000 to $100,000. Both are worth the same amount, technically, but if the spouses split the stocks and sold them, one stock sale sees a much higher tax ding than the other.

It may be necessary to consult a financial advisor or tax expert prior to finalizing your divorce agreement to determine the effect taxes will have on your property division. An experienced attorney can help you determine if such advice is necessary in your case.