When Los Angeles couples, whether married or not, end their relationships later in life or, even if they are younger, have a lot of wealth between them, there are special considerations they must take into account.
One of these considerations is the tax consequences of taking on particular pieces of property, as taxes can profoundly affect how much money each person nets as a result of a settlement. Incidentally, it is a good idea for anybody with a significant amount of property to understand how that property will be taxed.
Questions about taxes are best answered by an accountant and, in the event of a high net worth divorce or other separation, an experienced family law attorney who handles such matters when they entail a lot of assets and debts. Still, there are some basic things about which a Californian will want to be educated.
One of these is the concept of capital gains. The federal government imposes a capital gains tax on all sorts of investments, but a good example to use is a couple who owns several properties in the area. Given the history of California's housing market, these properties can be worth a lot more than they were when the couple bought them, even if it has only been a few years since the purchase.
Generally speaking, property transferred as incident to a divorce is not subject to capital gains tax at that time. However, the person taking on the property will have to pay if he or she sells down the road. So, for example, if the couple bought a property for $200,000, splits when the property is worth $400,000, and the owner wants to sell for $600,000, the owner will pay tax on a $400,000 gain.
While it may still be a good idea for one party to take on the property as part of a settlement, he or she should definitely be mindful that they will not be able to keep all of the profit from a sale, as a good chunk will go to taxes.