In a recent high-profile divorce, former “Baywatch” actress Pamela Anderson received $1 million in her settlement with poker player Rick Salomon.
The ex-couple, who had announced their marriage in January 2014, released a joint statement. “Public divorces can be harsh and cruel — we apologize to our families and friends for any hurt and embarrassment we have caused — we have come to an amicable agreement and are moving on,” they said.
Celebrity splits, including this one, tend to be prolonged litigated battles in which money matters take center stage. Divorce calls for skillful navigation through financial challenges as they emerge, often coupled with complicated tax rules.
Prior to reaching the settlement, Anderson had alleged that Salomon was a California resident who was evading taxes on his poker winnings of $40 million through his residency in Nevada, which does not have state taxes. She has now agreed not to challenge his residency.
Communication is essential when addressing finances, and mediation allows this to take place. Each spouse needs to consider their future taxes when dividing property. To avoid tax disputes and audits, divorcing couples should to come to an agreement about child support, alimony or property settlement.
In divorce, getting high basis property is better than low basis properly as splitting assets with a combination of both high and low bases allows each spouse to equalize their respective tax burdens in the future.
The IRS Publication 504 states that there is no limit on the amount of money or property that can be transferred tax-free between a divorcing couple. A property settlement is not tax deductible, while spousal support is tax deductible to the payer and taxable income to the recipient.
However, the situation is different with child support as it cannot be claimed as a tax deduction by the payer. Both spouses should consider their tax obligations thoroughly, which is why divorce mediation is a good option for divorcing couples because it allows them to determine what works best for them.
Gerald A. Maggio is a trained Orange County divorce mediator who has amicably resolved cases many cases out of court, as well as an experienced divorce and family law attorney. Mr. Maggio founded California Divorce Mediators in 2012 with the belief that although “not every marriage can be saved, every family can” and a mission to save families from the financial and emotional distress associated with traditional divorce litigation. California Divorce Mediators is located in Irvine, California, and serves the Orange County area and other counties in California offering divorce mediation, child custody mediation and mediation of other family law matters.
