Page 33 - Family Law Services

Taxability

Consideration should be given to the tax consequences of the assets received by the party. This may in-
clude the regular tax consequences of holding the property on an annual basis. In some circumstances, it
may also include taxes upon the ultimate disposition of the asset. Tax consequences are discussed in
greater detail later in this practice aid.

The laws in some states require the recognition or consideration of the deferred tax consequence on ap-
preciated assets in determining the apportionment of asset distributions in a marital dissolution; others
do not. In a number of states, the tax consequences are considered only if they are immediate and specif-
ic. The CPA needs to understand the jurisdictional rules in these matters.

CPAs may also consider which assets may be taxed immediately, such as current distributions from
qualified retirement plans that will not be rolled over, which assets will be taxed as capital gains at a lat-
er date, and which assets have a tax basis equal to their current value.

Risk Assessment

The CPA should consider the needs and levels of financial sophistication of the client when advising on
the distribution of assets and liabilities in order to recognize the client’s tolerance for short-term and
long-term risk. Some assets may be both illiquid and volatile, such as those contained in a 401(k) plan.
Other assets may be volatile but liquid.

© 2020 Association of International Certified Professional Accountants 31