Property and cash transfers between spouses made as part of a divorce agreement are generally tax neutral. This means that there is no tax on cash transfers, there is no gain or loss on property transfers, and the basis of a transferred asset will not change.
If one of the parties receives property that is income producing (such as rental property, stocks, or business interest), they are required to report the income they receive from that asset on their tax return.
Be aware, however, that special rules apply if there is a transfer of more complex assets, such as assets with unused passive activity loss, investment property with recapture potential, stock options, and deferred compensation. If there is a transfer of one of these assets, a person may end up with an adjusted basis, recognition of income, or recapture issues.
Learn more about Minneapolis, MN divorce attorney Jonathan Fogel: Mr. Fogel has extensive experience handling complex divorces and other family law matters, including spousal maintenance, custody disputes, post decree matters, paternity, and domestic abuse. Mr. Fogel has appeared numerous times as a guest on radio and television programs, both locally and nationally, to discuss issues related to divorce. He is the author of the book Preparing for Divorce While Happily Married and he has been recognized by Mpls. St. Paul Magazine, Twin Cities Business Monthly, and Minnesota Law & Politics as a “Super Lawyer” and a member of the top 6% of attorneys in Minnesota.