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Final in 2008 / income tax questions

I realize I need to consult a professional for specific advice, but in general, if a divorce is final mid-year and assets were shared, how are the following usually handled, and is this typically addressed in the marital settlement agreement? (Which obviously we did not do, or I wouldn't be asking these questions.) 

 

From 1/1/08 through 5/31/08 all marital expenses were paid out of marital assets and the estate was split 60/40 as of that date.

 

Real Estate
Quit claim deed for marital residence transferred ownership from joint to individual (husb/wife -> wife) as of May 31, 2008. Existing mortgage was paid off as of that date and remaining equity was split 60/40 between wife and husband, respectively.

  • How does the mortgage interest paid from marital assets get apportioned between the two parties, now filing individual returns for the tax year 2008? Does it follow the general distribution split of 60/40 = wife/husb? (Amortized points will have to be considered as well. Ugh)
  • Property taxes are paid in arrears, so the taxes that were paid from marital assets in 2008 were for tax year 2007. How are the taxes shared between the two parties for the tax year 2008? Should that also be 60/40, as per the estate distribution?

Other Income

  • State tax refund for the year 2007 was received and deposited in 2008 as marital income. It must be claimed as income in 2008. Is that also apportioned 60/40? Also have to think about that IRS rebate for 2008 that we deposited mid-year.
  • Interest and investment income through 5/31/08. The assets were split 60/40 as of that date, so only the interest through then is of concern, however the 1009-INT will be for the entire year. Although all liquid assets were originally marital, rather than mess splitting the actual cash, ownership of various accounts was distributed to balance the distribution. So he got some accounts, I got some accounts, and the 1099s for 2008 will go to whoever currently owns the asset. Messy, messy, huh?

Seems to me we dropped the ball on this and it all should have been laid out in the settlement as of 5/31/08 -- am I wrong about that?  I'm not looking for specific advice, just want to follow what the usual and equitiable practice is for this situation and recommend that through my attorney. I anticipate a drawn-out battle, regardless, so want to get moving on this ASAP.

Thanks!


by HeraC   142 Posts 
Posted on 12/23/2008 1:04 PM
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Answers for "Final in 2008 / income tax questions"  (1) (You must be logged in to answer)




yeah, this is something few people think about when they divorce, have substantial assets to divide - and it is final during the first part of the year- they want it over with then all of a sudden tax time comes and BINGO - messy messy is right. Had your divorce been over in July or later, you could have filed married - and not have this big of an issue.

Yes, you should have figured all this out in the MSA....

 

Generally speaking, since you two went 60/40 across the board that is how your taxes should also be handled. However I'm going to bet your ex is going to argue it should be 50/50. Without being specifically involved in the case that is about as technical on the subject I'm comfortable getting.

 

I'm REALLY surprised considering your substantial asset division neither of your attorneys even flagged the discussion of tax liabilities....

by spaznskitz   7745 Posts
Posted on 12/24/2008 12:41 AM
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