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Equity Compensation, Stock Options, Taxes and Divorce

Posted By Ryan Albaugh || 17-Jan-2014

Most people who are contemplating divorce are well aware of the house, car, bank account and credit card debts. However, if you or your spouse works for or owns a company that provided stock as part of the compensation package, you should be thinking about tax planning and the possible tax consequences of transferring this type of asset as part of the division of assets and debts.

The Internal Revenue Service has rules about the transfer of stocks. These rules vary depending upon the nature of the stock, e.g. whether it is a stock option (vested or unvested) or restricted stock. If the division of marital assets does not include actually dividing shares of stock or transferred them (in other words, the value of the stock or stock option is offset by other assets), there is no taxable event. However, if the stock or option is transferred as part of the division of marital property, the IRS will determine whether there is a tax, the tax basis and who is responsible for paying the tax.

We understand this issue and protect our clients from unexpectedly having the government take a piece of their divorce settlement. If you are considering divorce and you or your spouse has stock options or other complex financial considerations, call one of our experienced family law attorneys today for a free consultation.