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Thursday, April 4, 2013

Does the court consider tax consequences in a divorce?

As the income tax filing deadline approaches, we are all wondering how we can reduce our income tax bill and increase our refund.  Anyone who is considering divorce, going through a divorce, or has been divorced should consider how their divorce case could affect that tax bill.

We previously posted a series on Divorce & Taxes including the following topics:

Divorce and Taxes: Issue #1. Marital Status

Divorce & Taxes - Issue #2. Child Support v. Alimony

Divorce and Taxes: Issue #3. Child Dependency Exemptions.

Divorce and Taxes: Issue #4. Property Transfers.

Divorce and Taxes: Issue #5. Joint Tax Liability.

Divorce and Taxes: Issue #6. Same Sex Marriages.

Whenever any of these issues arise in a case, it is imperative that divorcing spouses and their counsel consider the tax consequences when negotiating a settlement.

In a recent opinion, the Massachusetts SJC confirmed the importance of considering income tax consequences of divorce orders and specifically ordered that a Judge, even when applying their broad discretion, must consider the potential impact of taxes on the divorce settlement.  In L.J.S. v.s. J.E.S. the SJC remanded a Judge's alimony decision finding that the Judge erred by not considering the potential Federal tax consequences.

For practitioners and parties, this decision underlines the importance of getting proper tax advice during your divorce case or negotiation.  The Judge must consider the impact of taxation on your settlement, but the Judge won't know unless you present the evidence of what that tax impact will be.


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