Divorcing? Watch out for tax liens

A recent California tax case shows the need to be sure to tell your attorney of all information when considering or getting a divorce.

The Jones case in District Court in California, US Tax Court No. 9374, was recently decided - against the wife.

The government was entitled to foreclose it's tax lien on a property held by the "nonliable" spouse for taxes assessed against her now ex-husband.

The tax lien attached to the property (before the divorce) when it was held by the couple as joint tenants. The lien was not extinguished when the wife received sole ownership of the property upon the dissolution of her marriage.

Apparently the husband did not pay his taxes and IRS filed a lien on the property, before the divorce.

Can't you hear "... look sweetheart, you get this property that is worth a lot ... and I'll keep other property to make the division of our assets fair...?"

If the husband did not tell the wife (or her attorney) of the tax lien, then the division of property on divorce probably was not fair and equitable.

She may have a right to recover from the ex-husband, but what if he can't pay?

Divorces are very much involved in tax and financial matters. Be sure to get all the information possible before you agree to any proposed division. This case shows the importance of disclosing all liabilities as well as valuing the assets fairly.

The court cited other cases that meant the wife lost the property when the government foreclosed to pay the lien. What a shame!

If you or someone you care about is going through a divorce, it's best to work closely with your attorney to be sure all information is disclosed. Sometimes a CPA is asked to go over the last few years income tax returns and other financial information to be sure everything is considered.

If a business or professional practice is involved, it's important to get a reliable valuation of the business or practice. Be sure to use a qualified appraiser.

Did you hear, "Do what's right and try to get along with people, in that order" by Ezra Taft Benson.

• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.


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