Property Settlement question

[NECPA in NEBRASKA]

A friend's daughter is getting divorced. They are using a mediator at this point, but I think that that will change. I told her that she needs to get someone more experienced than me to help her out. My question is, her husband and family own several closely held companies. He wants to give her a corporation with about $110,000 and a car in it. It won't do business anymore. Will the money become income to her when she pulls it out and not a non-taxable property settlement. It looks to me like she would receive whatever his basis is to determine gain or loss.

Thanks!

Bonnie

[Lion EA]

I think you're right. Unless the corporation has future earning potential that she whats to be involved with, getting non-taxable cash as a property settlement might suit her needs better. Even securities or their house will have their pre-divorce basis attached. Cold, hard cash can be invested however she chooses. Don't settle for investments he or his family chose.

[jainen]

>>He wants to give her a corporation<<

Watch your language. She will get the property not because he "gives" it to her, but because she has a claim on marital assets and is giving up something else. With this kind of money, she needs a lawyer to advocate for her even if they use mediation.

Your role is to calculate the tax effect and make sure her share is increased to cover it. You will probably need to push for full disclosure--the reason her old flame wants her to have that corporation is precisely because it represents a lot of taxable gain in a non-productive package.

[BulldogTom]

I think Jainen is absolutely on the right track.

Tom

Lodi, CA

[jainen]

>>on the right track<<

If you doubt it, tell the husband he should liquidate the corporation first, and then transfer the assets.

[NECPA in NEBRASKA]

Thank you all for the advice. He is already telling her that he doesn't have to claim a bunch of properties as marital assets, even though he is a partial owner. She stands to receive a large sum of money if he has to take all of his assets into account. She says that his family has a very creative accountant that is trying to shield him and I told her that she needs an attorney of her own to force full disclosure.