In property settlements, transfers between spouses are gifts and are not taxable. However, in liability; when both parties make an in-kind distribution of property, such as set-off and trades; when the parties take future income from a pension to be received later. While the sale of a house can sheltered with rollover of gain in some cases or an exclusion of the gain for individuals 55 and older, other transactions may result in taxable events.

In distributing property, courts consider the tax consequences when it can be demonstrated that the distribution creates a tax event and that the amount can be reasonably determined. In general, if the sale of an asset is not necessitated by the divorce and voluntary, tax consequences are not considered.

In alleging tax consequences, the party asserting that the consequences should be considered.

Generally, payee.

A number of special situations may arise, however.

As part of their payor and tax free to the recipient. (One way of the other, the government gets its money).

In community property income.

The distribution of any ERISA-qualiifed pension, profit-sharing or bonus plan may have adverse tax consequences because under the I.R.S. Code and ERISA these benefits are not assignable, and can only be transferred via a QDRO.

Child support is not deductible to the person who pays it, nor is it taxable to the person who receives it.

When the payor receives no deduction for the amounts paid from the trust.

Divorcing spouses must consider the consequences of what are called recapture rules.

A recapture is to prevent a divorcing couple from dividing their property and calling the distribution alimony.

Even when couples do not face major tax problems related to dependent child.

When on transfer of property between spouses, or former spouses and therefore incident to divorce and tax-free.

See ERISA, QDRO.

See also Recapture; Alimony; Child Support.