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(Forbes) Death and taxes may be prominently linked, but many Americans face divorce long before death, and a divorce can be almost as, well, taxing. If you're careful, it's possible to divorce and not face major tax bills. But a surprising number of tax flubs are committed every year in this area, even by professionals. Very slight differences in mechanics can yield huge tax differences for one or both spouses. What's more, your divorce lawyer may not be competent to address these tax rules so you may need a tax advisor.

Here are 10 things about taxes and divorce you should know:

1. Property settlements are tax-free.

If you divide property between spouses (or within limits, even after marriage), Section 1041 of the tax code says there's no tax to either party. Enacted in 1984, this provision reversed a Supreme Court case that ruled property divisions were taxable. This tax-free rule means you can divvy up property between spouses however you want. (That's provided they're both citizens; if one isn't a citizen, there may be income and gift tax issues.) But when you divide property, you'd better consider future taxes and the tax basis of the property in addition to its fair market value.

Example: Al and Betty are getting divorced and own a home worth $5 million, which they bought 30 years ago for $200,000. Betty is awarded the house. A year later Betty sells the house for $5 million. She has a whopping gain of $4.8 million, all of which is taxable to her!

Al and Betty might have cash, securities and other assets to divide, some with a high basis, some with a low basis. It can be more equitable for each spouse to take a mix of high and low basis assets.

Read the article at Wood and Porter



Neil Rosekrans editor of Arizona's Statebrief.com and LBN legal correspondent Sean Carter debate the Ground Zero Mosque, Rob Blogojevich and Roger Clemens.

Santa Clara Superior Court Judge Eugene Hyman says in many cases, even minor crimes can effect those charged indefinitely.

Despite a court setback, Gov. Arnold Schwarzenegger plans to move next week to bar anyone ever convicted of a felony, or a list of misdemeanors that includes shoplifting, from providing in-home care in a program that serves 430,000 low-income and disabled Californians.

Lawyers for Schwarzenegger and a group of workers argued Wednesday in Alameda County Superior Court over whether the governor's proposed rules should take effect while he appeals a judge's decision that found them illegal.
The In-Home Supportive Services program provides care to the blind and disabled and those older than 65 who need help with daily tasks to live at home.
Superior Court Judge David Hunter ruled in February that state law bars workers from the program for 10 years if they have been convicted of child abuse, elder abuse or defrauding Medi-Cal or any patient - but that outside of those categories, in-home patients can employ anyone they want.

Schwarzenegger's administration appealed the ruling. Its lawyers told the judge that the appeal automatically suspended his ruling and allowed the state to exclude all convicted felons, and others with criminal records, while the appeal is pending.
The Department of Social Services plans to implement the rules next week, said department spokeswoman Lizelda Lopez.
Hunter, however, could intervene if he found that the exclusions would cause undue hardships to the workers or their patients. He promised a decision in the next few days, said David Sheehan, lawyer for the employees who sued the state.
One of his clients, a 46-year-old woman, said she has spent 10 years caring for her mother, who has Alzheimer's disease and can no longer speak or feed herself. In a court declaration, the woman said she was convicted of vehicular manslaughter 27 years ago, served probation and is now her mother's court-appointed conservator.
"The last coherent thing my mother asked me was to beg me not to put her in a nursing home," said the daughter, who was not identified by name in the court document. She said her mother trusts no one else to care for her, and that she and her mother "could not survive financially" if the state disqualified her.
Among the infractions disqualifying in-home care workers are 16 misdemeanor crimes, including shoplifting. Plaintiffs in the lawsuit say the governor's plan would make it impossible for many recipients to employ their chosen caregiver - often a close relative or friend - because of a conviction from many years ago, and would force many of them into nursing homes.
Sheehan said patients have the right to learn their caregivers' criminal records and can decide whether to employ them.
But Lopez said state law already requires nursing homes to bar workers with convictions for felonies or serious misdemeanors, and the administration believes it has the authority to apply the same standard to the in-home care program.
"Our paramount concern is the safety and well-being of aged and disabled Californians," she said. "It's critically important that these individuals are protected to the largest extent possible, because they are alone in their home."
E-mail Bob Egelko at begelko@sfchronicle.com.
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