divorce settlement/depreciation recapture

[neverendit]

California Resident: I owned a sep prop residential rental during 8 yrs of marriage, during which we filed joint and claimed depreciation. In 2000 I was served for divorce, and my ex refused to file joint or claim 1/2 my income during the time together that yr. The rental was sold early in 2000, and I'm faced with huge gains. During my upcoming hearing for the financial settlement, I intend to make a claim for the depreciation add back as income, as the community benefitted from this tax deduction for 8 years. How should I structure this claim? Am I asking for an amount equivalent to 1/2 the depreciation total added back as income after the sale, or just 1/2 the tax amount paid on the depreciation recaptured?

 

[I AM ALWAYS LIABLE]

California Resident: I owned a sep prop residential rental during 8 yrs of marriage, during which we filed joint and claimed depreciation. In 2000 I was served for divorce, and my ex refused to file joint or claim 1/2 my income during the time together that yr. The rental was sold early in 2000, and I'm faced with huge gains. During my upcoming hearing for the financial settlement, I intend to make a claim for the depreciation add back as income, as the community benefitted from this tax deduction for 8 years. How should I structure this claim? Am I asking for an amount equivalent to 1/2 the depreciation total added back as income after the sale, or just 1/2 the tax amount paid on the depreciation recaptured?

My response:

You'll find that you can't "recapture" anything concerning this property.

First, it was your separate property.

Second, all gains and losses were realized DURING the marriage. Any gains and losses will be considered as your "gift" to the marriage, and because it is your separate property, you will be the one "taking the hit" due to any losses.

"Recapturing" is only available for jointly owned property, and only for those losses realized AFTER separation.

IAAL

 

[neverendit]

The recapture is a tax consequence following the sale of the income property, as the yearly depreciation is added back as income. Since the community benefited from the tax advantage of the depreciation taken each year, shouldn't the tax consequences of the recaptured depreciation as income be borne by the community also? The sale occured during the marriage, and petition for divorce occured shortly after.

We reserved on reimbursement of 2000 tax consequenses in initial pleadings for financial settlement. Worth an attempt, and if so, how structured?