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Separation agreement does not specify whether shares of restricted stock would be distributed pre-tax or post tax, who pays tax?

Denver, CO |

Shares of restricted stock that were granted during the marriage, vested post-divorce, and I paid taxes on them. The separation agreement says that we will divide the shares 50/50, but does not specify who has to pay the tax. My ex wants her 50% pre-tax, which means I would be paying the tax on her share. I think the fair way to divide the shares is post-tax. Is there any precedent for this? If it goes to trial, what is the likely outcome? Thanks.

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Attorney answers 3

Best Answer

In Colorado, the answer is in your divorce final orders. If the payment of tax is not clear from the context or language of the section, then your recourse is either to negotiate with your ex or her lawyer, or go back to court and have the section clarified. I see no reason in this state why the court would give a windfall to one party by allowing them to escape their share of the tax burden.

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Division of property in a dissolution of marriage is supposed to be "equitable", which doesn't always mean "equal". Courts can look at a multitude of factors in an attempt to do what is fair and just. The question is therefore a little bit beyond the boundaries of what this website can address. You should retain competent counsel to discuss the details of your particular circumstances.

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Unfortunately, your separation agreement should have addressed this issue. Check the agreement in other areas to see if it addresses how taxes are to be paid on the division of assets. I agree with the previous attorney that if you go to court an equitable solution will be sought by the court. This may not be a 50/50 arrangement. Try to work this out with your ex. Maybe there is somewhere in the middle where you can meet and save yourself legal fees.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.