Transfer of stocks incident to divorce is a common occurrence at brokerage firms. It requires specific directive to the broker about the transfer. Spouses should also exchange records about the original cost of the stocks.
How to Transfer
Transfer of stocks pursuant to divorce is accomplished by written instructions to the brokerage firm holding the stocks. Both spouses sign the letter, which should list the name and the number of shares for each transferring stock. A copy of the court order or divorce decree is attached.
The transfer is most easily executed when the recipient spouse has a separate account at same brokerage as the transferring spouse. The recipient can move the stocks to another broker later.
Current Taxes
Transfer of stocks incident to a divorce are not taxable unless the recipient spouse is a nonresident alien or the transfer is made in trust to secure installment payments. Only stock redemptions for the purpose of paying cash are subject to taxable gain or loss.
Future Taxes
The spouse receiving transferred stock is taxed on the gain or loss upon selling the stock in the future. This is calculated as the difference between the sale proceeds and the cost basis. The cost basis of the recipient spouse is the same as the cost basis as the transferring spouse.
