DIVORCE

[TAXMAN]

TP separated 06 granted divorce in 07 non community state.Problem is: In 06 joint investment account showing interest, dividends. capital gains distributions, stock sales, with TP's # being used. This account was frozen untill divorce issued. Broker was informed by court(07) to divide account into 2 accountsFor 07. No Problem07 However how do I allocate to spouse her share of the earnings for the 06 1099's received (nominee for int and div) how do you show half of the capital gains and sales)? Value of the 06 account on 12-31-06 was used as a division of property. each got half of the value in final decree.

many thanks

[Pacun]

How about issuing a 1099 to ex.

[kcjenkins]

I guess I do not understand the situation clearly. Why would you be allocating part of the earnings to the ex? That would have been done by the splitting of the account, wouldn't it? I understand why you WANT to, but I don't think you should, if it was his account. If it was a joint account, then I would do it, using a 'nominee' 1099. But I'd be very careful to read the divorce paperwork first, to make sure of the legal issues, and maybe, if it is not mentioned at all, talk to the client's attorney for an opinion, first. Thing is, in these cases, sometimes the court mentions such issues, and sometimes it does not. Don't just ASSUME. Insist on reading the paperwork first.

[jainen]

>>each got half of the value in final decree<<

That does not mean each had a 50% interest BEFORE the lovers started swapping assets and accusations. Unless you have some other evidence, if the statements do not show joint ownership you can conclude that the 2006 income should be allocated to only one person.

[TAXMAN]

Basically this is what happened. Using 10K value on 12-31-06 which included all int,div,cg's for 06 court said split this account in half which was done in 07. Problem is all income 06 was reported in TP's #. I can nominee the int and div's but not sure how to get the cg's off the return? thanks to allthat have read and responded.

[jainen]

>>I can nominee the int and div's but not sure how to get the cg's off the return?<<

Do you mean to say that the court went back in time to allocate INCOME received prior to the divorce? Usually the court is only dividing marital PROPERTY held on the specific date. In what way did she receive the income as his nominee? I don't think you can add that title later.

Are you sure the other party has agreed to cover this part of his ex-wife's taxes? If it wasn't in the final decree, you are asking for trouble to unilaterally expand the judge's order to cover a prior year. And by "in the final decree," I don't mean they referenced the end of year balance, but that they specifically agreed to what you are trying to do.

[jasdlm]

Is he filing MFS for 06?

[Pacun]

I think you are not providing enough information for us to give a good advice.

Let's say that on 12-31-2006 the value to be split was 20K (10K each). Since the money was not withdrawn until next year, the value split was $24K and the wife took 12K. Husband was given 1099 and needs to pay taxes on earning and possible penalty if not over 59.5. Since this money was distributed with a court order, he doesn't have to pay anything. I hope someone can elaborate on my thought or tell me I am completely off.