WHAT FAMILY LAWYERS ASK US MOST

Family lawyers don’t hate tax. They hate owning tax answers they can’t verify, in cases where every number is contested and every mistake has their name on it. So the questions arrive carefully — and the same ones arrive again and again.

THE RECURRING FIVE, ANSWERED THE WAY WE ANSWER THEM

“Is any of this deductible?” Mostly no — Gilmore killed the deduction and 2018 buried the remains. But the question the profession stopped asking is whether the property-related fees are capitalizable, and they can be: into the basis of assets defended or acquired in the division. That changes nothing on this year’s return and a great deal at the client’s eventual sale. The full analysis is in the fee-basis article below.

“Which spouse should take the rental?” The one who can use the depreciation against the income, plans to hold on a horizon that matches the recapture story, and understands the suspended-loss position riding with the property. That is a facts question with a tax answer — not a preference question.

“What does the buyout do to basis?” Whatever the structure says. Redemption, cross-purchase, or §1041 transfer produce different answers from the same dollars, the regulations let a properly drafted agreement choose who bears a redemption’s tax, and the choice closes at signing. If you ask one tax question per case, ask this one before the MSA is drafted.

“Should they file jointly this year?” Price both filings, then treat the signature as what it is: joint and several liability for every number on the return. If joint wins on the math, it should still cost the other side an indemnity, review rights, and a written refund allocation. And remember the asymmetry — separate can later become joint; joint can never become separate.

“What happens to the carryforwards?” They trace — NOLs and capital losses to the spouse whose activity generated them, suspended passive losses with the property. Which means they are negotiable now and litigable later. A one-page tax-attributes schedule in the agreement retires the issue.

THE TWO QUESTIONS THAT CHANGE CASES

“What is this settlement worth after tax?” Asked while the asset schedule is being assembled — not after offers are exchanged — it moves real money between the columns and hands you leverage the other side hasn’t priced. A face-value schedule is an opening position wearing a closing document’s clothes.

“How should our time entries describe the property work?” Because fees defending or dividing property can enter asset basis, the billing narratives your firm writes this month are the evidence your client’s CPA will need years from now. Entries that identify the asset and the activity — valuation, title defense, negotiation of the division — support the allocation; “attention to file” supports nothing. Five minutes of entry discipline preserves a benefit someone else will discover later, with you on record as the lawyer who caught it.

The firm works alongside matrimonial counsel — never as counsel of record, never touching the client relationship, on fixed fees your client sees before we start. Your case, our lane.

THE MECHANICS, FOR THE SKEPTICAL

• Engagement: special counsel for the tax issues, scoped in writing; you remain sole counsel of record.
• Privilege: where a forensic accountant is doing tax-sensitive work, a Kovel structure routes the engagement through counsel so the analysis stays privileged — set up at retention, not at deposition.
• Timing: the highest-value entry point is asset-schedule assembly; the second is MSA drafting; the third, and most expensive, is after signing.
• Fees: fixed and disclosed. Contingent fees are barred in this work anyway — you and your client will always know the price.

ELSEWHERE IN THIS SECTION

• For Family Law Attorneys — the practice page: how the firm works alongside matrimonial counsel
• Are Divorce Legal Fees Deductible? — the fee-basis article — some now, some later, some genuinely lost
• Divorce Special Counsel — the engagement, scoped