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Taxes and divorce Illinois

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  • Taxes and divorce Illinois

    I got divorced in 2007. This is the first tax year that we are filing separately. As part of the agreement, I retained the family home and paid my ex $50,000 for her share of the equity. Is any portion of this amount deductible as alimony or maintenance?

    I was also forced to liquidate some investment accounts and give her half, but the 1099b is in my name. Can I deduct any part of the half I gave to her? And should she claim that money as income? I reinvested my half. Am I still liable for the full amount that was withdrawn?

  • #2
    Originally posted by xpq559 View Post
    I got divorced in 2007. This is the first tax year that we are filing separately. As part of the agreement, I retained the family home and paid my ex $50,000 for her share of the equity. Is any portion of this amount deductible as alimony or maintenance?

    I was also forced to liquidate some investment accounts and give her half, but the 1099b is in my name. Can I deduct any part of the half I gave to her? And should she claim that money as income? I reinvested my half. Am I still liable for the full amount that was withdrawn?
    Both of those issues are property settlement issues NOT alimony or maintenance. Therefore no, you may not deduct them, and no, she would not declare them as income.

    All you did was give her, her half of property that already existed. Had you divided the brokerage account, rather than liquidating it, then she would have received a 1099B if she had chosen to liquidate her portion. However you chose to liquidate it instead. You also could have gotten a judge to order that she be responsible for any taxes on the brokerage funds (by either receiving a smaller amount of the cash, or reimbursing you for half of the tax) but you obviously chose not to do that either.

    Remember, you will only be paying taxes on any "gain" from the liquidation of the brokerage account. You will not be paying taxes on the entire amount listed on the 1099B.

    Comment


    • #3
      Thank you for the reply. Unfortunately, that is the answer I thought I would get, but I wanted to double check. At least I remembered to have it stated in the divorce papers that I retained the tax deductions for our mortgage and property taxes.

      I am a little confused about the investment account. The account was originally set up with both of our names, but just my Social Security Number. I was told by the girl handling the account that since it was in both of our names, I “had” to close the account and then open a new account in just my name. I was sent two checks, each for half the total and both made out in both of our names. I signed her check and gave it to her, and she signed mine and I sent it back to the brokerage firm. They then used that check to open the new account.

      Was there a way to do this without taking this tax liability at this time?

      Comment


      • #4
        Originally posted by xpq559 View Post
        Thank you for the reply. Unfortunately, that is the answer I thought I would get, but I wanted to double check. At least I remembered to have it stated in the divorce papers that I retained the tax deductions for our mortgage and property taxes.

        I am a little confused about the investment account. The account was originally set up with both of our names, but just my Social Security Number. I was told by the girl handling the account that since it was in both of our names, I “had” to close the account and then open a new account in just my name. I was sent two checks, each for half the total and both made out in both of our names. I signed her check and gave it to her, and she signed mine and I sent it back to the brokerage firm. They then used that check to open the new account.

        Was there a way to do this without taking this tax liability at this time?
        Go get a consult with a local tax pro. There may be a way to divide the liability. I don't have time to research it for you during tax season, but a local pro can research it for you.

        However, make sure that the cost is worth it. Remember, you are only taxed on any gain, if there even is a gain.

        Comment

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