Divorce? Who is paying for Captial Gain Tax?

[monster24]

Hi there,

can anyone tell me how captial gain tax is calculated in case of a separation/divorce?

Take an IP: value = $440,000, owing = $280,000 (100% owned in the name of the main income for tax purposes)

Divorce settlement suggests 50%/50% value when sold - so $80,000 for each partner for a $160,000 gain (round numbers here).

But who is paying capital gain tax ? Does the main income holder has to pay capital gains tax on the entire gain ($160,000) or just the 50% ($80,000)?

I would think only the part each partner recieve but I might be wrong.

Any ideas ?
Cheers ?

 

[bianca]

Check with your lawyer

Not to sure, but I was under the impression that the CG was paid by each party, with the person in the least favourable position getting some sort of reprieve through their lawyer, by filing a transfer to change the title to being held as tenants in common ( or joint tenants-not too sure of which one)prior to the divorce. This may only be for PPR's, and that happened to my son,( his wife was exempt)so it may be wise to check with your lawyer.

 

[josko]

Oh boy.....that would really fuel the fire!

Regards JO

 

[geoffw]

Don't forget that the CGT applies to the increased value of the property, not the amount paid off. So it's the selling price minus the buying price minus buy/sell expenses (the ones you couldn't claim before).

Then if the property has been held for more than 12 months there's a 50% discount.

Say it's sold for $550,000 and was bought for $440,000 with $10,000 stamps etc. The capital gain is $100,000, so taxable income is $50,000.

For a single person this $50,000 would be added to your taxable income for the year, and the level of your other income would determine how much tax you pay.

In the case of a divorcing couple, it would probably depend how they bought the property. The $50,000 would presumably be apportioned, possibly 50%, between the two people.

 

[Mry]

Sales are dealt with between the two of you in accordance with your agreement.

If the assets are not sold, speak to your accountant about the Marriage breakdown rollover provisions in section 126-5. In fact, it can be easier to just transfer the assets and then sell them.

 

[monster24]

thanks for the link. I will pass this on to my accountant/lawyer
cheers