I was married for 27 years. We had a farm in SC which was owned by my husband, myself and his parents in 4 equal shares. The value of our property was 2 million and my ex-husband agreed to refinance the farm along with his parents and pay my share in the amount of $475,000 at mediation. The court order called it an equitable distribution of marital property. He has obtained the loan to refinance and I am scheduled to close on Friday and receive my distribution. Is this taxable for state and federal income tax purposes?
Do you have a lawyer or an accountant? You should speak with them.
The sale is not income because it is not based on your work. It may be taxable as a sale of real property ora s capital gains depending on how the deal was structured. Your accountant will know best.
I agree with Attorney Burgess that you should have a qualified tax professional assist you with the taxation aspects of your marital settlement and with preparing your tax return for this year. However, as a general rule, funds that you receive as part of an equitable distribution of marital property are not considered income for tax purposes. Typically, your husband's tax basis in the farm would remain whatever it was prior to your divorce. If this transaction is reported on your tax return at all, generally you would report receiving the amount you received in the distribution with a basis exactly equal to that amount and thus would have no taxable gains or losses on the property distribution. Again, you will want to consult with a tax professional based on your exact situation.
Please note this information is general in nature and based solely on the information you have provided. This does not constitute specific legal advice.
Assets received in connection with a divorce settlement are not considered income.
This is not intended to be legal advice, and is general in nature.
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