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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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  #1  
Old 09-12-2013, 02:13 AM
Karver Karver is offline
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Default Asset splitting

So if your ex owned some buildings while you were married, you separated and he gave you half the market value of the buildings, would that money be considered your income for CS purposes?
My ex brought up tonight that if he were to borrow money from the other partners in the buildings and pay me out of them would that be good? I said it sounded good to me. Then he said something about it being paid to my company as an income.
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Old 09-12-2013, 07:47 AM
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NBDad NBDad is offline
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Assets are split separately. Unless the income would then show up on your income taxes and affect your line 150, it's not considered "income" for CS purposes.

I imagine that it could be considered some sort of sale or capital gains, and it'll likely go onto your taxes in some portion or form. If it does, then it'll affect CS as it'll affect line 150.

Speak with an accountant on this.
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Old 09-12-2013, 08:46 AM
dinkyface dinkyface is offline
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I just realized, if he splits the taxable capital gains with you 50-50, and you are sharing kids 50-50, then you sould be using offset CS calculation, based on his income of, say 400K, and your income of 300K, so the offset CS might actually be quite small..., and compared to ignoring this capital gain altogether, it might not make much difference.

Including capital gain in income for CS:
your income 300K -> 5316/mo CS
his income 400K -> 7036/mo CS
He pays your the difference i.e. 1720/mo CS

NOT including capital gain in income for CS
your income 10K -> 0/mo CS
his income 100K ->1866/mo CS
He pays you 1866/mo CS

So, not much difference if you include the capital gain or not.

Comments from anyone else?
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Old 09-12-2013, 09:31 AM
HammerDad HammerDad is offline
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It may be income it may not. I don't know because it would really depend on how it was done. I would highly recommend getting tax advice on that.

However, notwithstanding how you are bought out, once you have the money, there is an expectation that the money will gain interest and that interest would be income. The amount of interest would depend on how you historically invested and rates of return.
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Old 09-12-2013, 09:42 AM
dinkyface dinkyface is offline
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The amount of interest on the sale proceeds would depend on how she ACTUALLY invested it, and it would factor into the NEXT year's CS. She would be free to buy and hold a bunch of growth stocks that pay NO income. Or put it into a GIC that pays 2% interest.
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Old 09-12-2013, 10:13 AM
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It does not matter if it is income or shows up in line 150. It is net family property equalization and has NO impact on CS.

There are exceptions in sections 16 to 19 of the CS guidelines that makes what I am saying true by law, but mostly COMMON SENSE dictates it is not included as income for CS - just the same as his retention of his half of marital property is not income and does not effect CS!!

Last edited by billm; 09-12-2013 at 10:19 AM.
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Old 09-12-2013, 10:14 AM
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Quote:
Originally Posted by dinkyface View Post
The amount of interest on the sale proceeds would depend on how she ACTUALLY invested it, and it would factor into the NEXT year's CS. She would be free to buy and hold a bunch of growth stocks that pay NO income. Or put it into a GIC that pays 2% interest.
Maybe in the following years when NOA's are exchanged....maybe...

In the first year, it would be reasonable to impute an income equal to what interest could be obtained.

Equate it to winning the lottery. You win $10,000,000. That $10,000,000 is not income to be included on line 150, but any interest on that money is. It would be totally reasonable to impute an interest rate equal to the rate obtainable by a savings bond or interest savings account.
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Old 09-12-2013, 10:18 AM
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Quote:
Originally Posted by Karver View Post
So if your ex owned some buildings while you were married, you separated and he gave you half the market value of the buildings, would that money be considered your income for CS purposes?
My ex brought up tonight that if he were to borrow money from the other partners in the buildings and pay me out of them would that be good? I said it sounded good to me. Then he said something about it being paid to my company as an income.
I think equalization for divorce is not taxable - though the capital gains may be.

I bought my ex out of our family cottage. I paid a reduced price by guessing at what the capital gains would be at that time if we sold it. If I sell it in the future I assume the capital gains will be from when I purchased it when I was married, so that settled the issue.
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Old 09-12-2013, 10:19 AM
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That's a very interesting question.

Technically he bought you out of a property. So technically you sold. If the proceeds you received from your half was more than the cost of your half, then yes I would say it was income.

The thing is when someone normally buys someone out of a house this is not income because it's where you live. This is different because tax law states that sale of your residents is not a taxable event. However, say you owned a cottage and had to sell it to equalize then the government would want the capital gains on this. Therefore both of you would have capital gains. Although they would end up being the same amount so technically they would negate each other for support purposes.

You sound like you want the sale to be income for him but not you.

So lets say you guys together paid $250,000 for a property during marriage.

At divorce the property was sold for $500,000.

The net gain (Capital Gain) was $250,000.

$125,000 would be your gain and $125,000 would be his gain. This should end up on both your income taxes.

Now lets say he just bought you out. He paid you (thus purchased) your half for $250,000. Your gain would still be $125,000. He would not have a gain because he didn't sell anything.

So this $125,000 should appear on your income. He wouldn't have to put anything on his income until he sold the property.

It would look like this

Buy 1: $125,000 (50% of $250,000)
Buy 2: $250,000 (What he paid you)

His total Cost: $375,000.

If he did sell it for $500,000 his gain would be $125,000 at the date of sale.

If he sold it for $600,000 his gain would be $225,000 ($600,000 - $375,000).

Hope that helps.

Last edited by FB_; 09-12-2013 at 10:23 AM. Reason: clarification
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Old 09-12-2013, 11:59 AM
Karver Karver is offline
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I'm definately not an investor so I'm not sure what I would do with the money other than put it in the bank.
That's my huge problem- I can see the whole it's his income but not mine arguement, but I don't know what's applicable or how it would be classified.
Ex is a commercial realtor, so leasing and sales are his business and everything was under his own company name, my name is no where on any of it.
My accountant and his accountant say this is his income period.
But I guess there could be some guidelines for this, I did phone a forensic accountant myself.
This is why I'm so frustrated! I just want to know these numbers before I carry on with this court shit, but no one is making finding out these numbers a priority.
I'm saying we need to hire a professional to just get this nailed down, but ex would rather spend $4k on a mediator and convince them instead. My lawyer just says we need to go to court, his cap gains will be doubled for CS purposes.
I'm saying I'm not prepared to do ANything at this point until this is figured out.
There are so many varying opinions, I don't feel like spending thousands of dollars just to see the cap gains wiped each other out.
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