Let’s say you have a 401(k) plan worth $200,000 and you and your spouse have $200,000 in equity in the family home.  Should you trade your spouse the house for your pension plan?

No because the equity in the house is tax free.  You will pay a tax of about 35% when you start taking your pension.  That makes the pension worth 65% of $200,000 or $130,000.

Would you let your spouse keep $10,000 in the joint checking account if you can keep $10,000 in joint IBM stock?  The bank account is tax free.  Any capital gains on the IBM stock will be taxed when you sell it.  So you won’t get $10,000 in cash.

Trades that look equal on paper, aren’t necessarily equal once you take taxes into account.

A Boston law firm has started a blog called “Our Family Business at Odds” written by members of the firm and a business consultant.

It is dedicated to avoiding, resolving, mediating or litigating the disputes that arise in family businesses.  A recent article is about the McCourt divorce which involves the Los Angeles Dodgers as the family business.

Family businesses, says the introduction, “are not like every other business. Family businesses are personal and evoke strong emotions, which sometime go back generations, which can make them especially volatile. These strong emotions must be taken into account when attempting to resolve disputes.”

We see a lot of business owners in the Washington, DC area.  These cases are usually interesting because they involve not only divorce law, but business law, corporate law, partnership law, contract law, patent law and tax law as well as the emotional issues.

Suspect your spouse has hidden assets in a secret Swiss bank account?  USB, a Swiss bank, has agreed to turn over the names of 4,450 U.S. citizens that have accounts there to the IRS.

The IRS is investigating allegations of tax evasion.  But people hide money for all sorts of reasons, like to avoid creditors, and to avoid splitting up assets in a divorce.

So there are probably many spouses and ex-spouses that would like to get a look at the list.  But, it is not certain that the list will be made public.  The IRS is giving clemency to tax cheaters until September 23.  And IRS settlements are usually confidential.

One way an ex might find out, though, is if a spouse filed a joint tax return with the tax cheater, the ex might be notified by the IRS of the corrected tax filing because his or her name is on the return too.

Read more in this article at Time.com by Stephen Gandel

TGC Attorneys James J. Gross and Nelson A. Garcia will speak at the Commission for Women tonight at 7:00 pm on Negotiating a Separation Agreement with Your Spouse.

The seminar will include the advantages of an agreement over a contested divorce, what to include in an agreement, tips and tactics, strategies for negotiation, the different stages of negotiation and different negotiation techniques.

The cost is $20.  Call (240) 777-8300 for more information.  The Commission for Women is located at 401 N. Washington Street, Rockville, Maryland.

“We will reserve our comments for the court.”  – Lois Finkelstein in “NBA Star Bosh Bashed in Suit for Child Support” by Caryn Tamber of The Daily Record, March 26, 2009.

Nelson Garcia will be on “News Nine” with Andrea Roane (WUSA 9 TV) to discuss the effect of taxes and the economy on divorce, at 9:00 a.m. Friday, March 27, 2009.

James J. Gross was interviewed by KMOX Radio on “Divorce in a Recession”, March 2, 2009.

While a lot of divorces these days involve dividing debt rather than assets, there are still a few marital estates left with wealth and complexity.

When the parties get stuck on one item, like jewelry or a car or cash, one idea for breaking the impasse is to make a gift to the children.  This can be either outright or through a will or a trust or a contractual provision to be executed at some time in the future.

For 2009, you can give up to $13,000, or $26,000 for a married couple, to each recipient without incurring the federal gift tax

Although President Obama promises taxes will be lower for 95% of taxpayers, a question I get from time to time is, “Can I save taxes by getting a divorce and just living together?”

Many two-income family taxpayers pay more taxes as a married couple than they would by filing separate tax returns as single individuals.  That’s called the marriage penalty.

The answer is you might save a little bit on taxes, but how much will a divorce cost you, both in terms of dollars and the good will of your spouse?

First, Congress has eliminated the marriage penalty for married couples making less than $132,000 and roughly equal incomes.

If a married couple earns $150,000, with equal incomes and a standard deduction, the marriage penalty is $500.

If they earn $200,000 under the same circumstances, they will pay a marriage penalty of about $787.

And there are other financial benefits to staying married, including inheritance taxes, insurance and Social Security, that you would lose if you got a divorce.  Finally, if you divorce in one year and remarry in the next, the IRS may disregard the divorce and require you to file as married anyway.

Source:  Post by Sue Shellenbarger

Joe the Plumber stopped by to see me about his divorce today. “I worked all these years using my own blood, sweat and tears to build up my business. She wants part of it. And Barack Obama wants some of it.”

“Come on, Joe, it’s not that bad. Let’s look at it more carefully,” I say. “Obama’s tax plan provides a $3,000 tax credit for every new job you create, a reduction in taxes if you make less than $250,000 a year, and no capital gains if you sell your business.”

“It doesn’t sound so bad when you put it that way. But what about my wife? She never worked a day during our marriage,” says Joe.

“Your wife gave up her own career to raise your kids and make a home for you so that you were able to work so hard to build up your business. The law provides that the judge has to consider, among other factors, the contributions, monetary and nonmonetary, of each party.”

“So what you’re telling me,” says Joe, “is that I have two silent partners in my business – my lazy Uncle Sam and my wife.”

“That’s one way of looking at it, Joe,” I tell him. “Where are you going?”

As Joe leaves my office, he turns and says, “I’m going to see if my wife wants to buy my plumbing business.”

?Which strategies do people and their lawyers employ during divorces? There are only two social strategies that human beings use, according to Herb Guggenheim writing for CapitalM, the local Mensa newsletter. Those strategies are:

1. Reciprocal Altruism.

This approach is based on the idea that if you do kind things for other people, they will do kind things for you. It is the psychological equivalent of the Golden Rule, that is do unto others that which you would have them do unto you. It is the American cliche, “You pat my back and I’ll pat yours.” It is the French saying, “You send the elevator up to me and I’ll send it back down to you.”

2. I’m Only in It for Myself.

These people see the world as a hostile place. It is dog eat dog. Only the strong survive. These social Darwinist believe that while the inferior, weak people are busy being nice to each other, they will swoop down and take what they want, when they want, no matter what the consequences may be.

If both parties use Reciprocal Altruism, the divorce can be settled rather handily. If both are using I’m Only in It for Myself, then it seems they are destined to have a long and costly litigation. What happens if they are each using a different strategy? It seems to me, the I’m Only in It for Myself strategist will walk all over the Reciprocal Altruism strategist and end up with the better part of the marital estate. Guggenheim says, that while he can sleep better at night as a Reciprocal Altruist, it is his observation that people who take what they want seldom suffer for it.

Perhaps the best strategy is a blend of both. Focus on what you want and ask for it. Be polite but firm in the asking — an iron fist in a velvet glove. Like the Eagle on the Quarter, hold out the olive branch in one hand (settlement) and the arrows in the other (litigation). Then your spouse can decide which strategy it is going to be.

The IRS said audits for last year rose 7 percent for individuals, 14 percent for taxpayers earning more than $100,000, and 30 percent for those making $200,000 or more according to this article. Millionaires had a 1 in 11 chance of losing at audit roulette.

A test to see if divorced couples were correctly reporting alimony in California concluded that 40 percent of the taxpayers flubbed it, usually over several years. On average, they owed the state an additional $5,800 — and that was just tab before the IRS was notified.

Auditors commonly found recipients of alimony and family support failed to report it as income. Meanwhile, the spouses cutting checks often wrote off alimony that the divorce decree stipulated was neither taxable nor deductible, or erroneously deducted child-support payments.