{"id":2069,"date":"2014-07-13T12:30:48","date_gmt":"2014-07-13T12:30:48","guid":{"rendered":"http:\/\/www.ua-cpas.com\/?p=2069"},"modified":"2014-07-13T12:30:48","modified_gmt":"2014-07-13T12:30:48","slug":"divorce-tax-tip-monetizing-nols","status":"publish","type":"post","link":"https:\/\/www.ua-cpas.com\/blog\/index.php\/2014\/07\/13\/divorce-tax-tip-monetizing-nols\/","title":{"rendered":"Creative Advanced Divorce Tax Tip – Monetizing NOLs"},"content":{"rendered":"

<\/span>All family law attorneys understand the basics of income taxation as it relates to a marital dissolution: Alimony is taxable to the recipient and deductible by the payor and child support is not taxable.<\/span><\/p>\n

In complex cases with closely held businesses, it\u2019s important the attorney (or an expert) review not only the business tax returns, but, the personal income tax returns as well.<\/span><\/p>\n

If one spouse owns all or part of a pass-through entity such as a Subchapter S or Partnership, there may be hidden assets not usually found on the marital balance sheet. Those assets are called Net Operating Losses (NOLs) carry-forwards<\/span>. <\/strong><\/span><\/p>\n

Taxpayers can carry back these losses two years (and get refunds) and\/or elect to carry them forward against future income. (NOLs can be carried forward twenty years.)<\/span><\/p>\n

Well, guess what? When assets are split, the NOLs travel with the business owner<\/strong><\/span>. And, assuming its material, they have a value which needs to be monetized. Why does it have value? Because it will save the business owner spouse $ X amount of taxes over the next twenty (or less).<\/span><\/p>\n

A very, very simple example. The couple divorces and a $1,000,000 NOL travels with the husband. (No you can\u2019t split the NOL) The non-titled spouse\u2019s lawyer never thought to monetize the NOL (or even the expert CPA, who is a generalist without matrimonial litigation experience).<\/span><\/p>\n

Two years after the divorce the company turns around and the owner spouse has income of $200,000. Pick your bracket, whether it\u2019s 28% or 35% or 40% (I rounded.). The NOL was could be worth somewhere between $56,000 and $80,000. Three years after the divorce, the owner spouse has income of $200,000. Another $56,000 to $80,000. You get the picture. What if all the NOL is used? That can be a savings of possibly as much $400,000.<\/span><\/p>\n

Failure to monetize this asset and award the non-titled spouse an off-set, can be the basis of a malpractice suit!<\/span>
<\/strong><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

When a couple divorces, there is value to a Net Operating Loss(NOL) of the business owner spouse. The tax benefit of the NOL must be considered when valuing all the marital assets,<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28,5,17],"tags":[69,139],"class_list":{"0":"post-2069","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-alimony","7":"category-divorce-forum","8":"category-property-settlement-agreements","9":"tag-divorce","10":"tag-net-operating-losses","11":"entry"},"_links":{"self":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/2069","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=2069"}],"version-history":[{"count":0,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/2069\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=2069"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=2069"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=2069"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}