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Avoiding Tax Pitfalls in New York Real Property Transfers in Separation and Divorce

Most divorces involve the transfer of a marital residence between the parties as part of equitable distribution, especially when there are minor children who will continue to reside in the family home.There is a transfer tax payable on the transfer of real estate, including the marital residence, in connection with the implementation of the marital settlement agreement or divorce.

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It has been a contentious few years, but you have reached the day when your divorcing New York clients will finally sign a settlement agreement resolving all issues between them. The parties, like so many others, have a variety of assets, ranging from bank accounts and pensions to personal property, all of which are being transferred to one party or the other. One spouse is gaining sole ownership of the marital residence. While the agreement is silent as to the precise value of each asset, the agreement has been carefully calibrated so that the parties will receive what they each perceive to be 50% of the marital estate. In order to make the break between them as clean as possible, and reduce the cash-strapped parties’ future legal expenses, you have also arranged for the transfer of the marital residence to occur simultaneously with the signing of the agreement.

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