Tax Tip of the Week*

PAYING FOR AN ASSET

One of the more frustrating realities of the tax law is that as part of a divorce process, when one spouse buys out the other spouse’s interest in a piece of property, it is a non-tax event. A common and simple example is that the wife keeps the house, and pays the husband let’s say $200,000 for his interest in the house. That exchange of money is, from a tax point of view, a non-event. That $200,000 does nothing as to the tax basis in the house. It is the same situation when one spouse buys the other out of an interest in a business, or a stock portfolio.