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Pamela Anderson's divorce and tax issues

The recent divorce of Pamela Anderson and Rick Salomon may have some people in Illinois thinking about the tax consequences of a marital dissolution. The former Baywatch star's divorce made headlines for many reasons, and one of them was that Anderson questioned whether her ex was guilty of tax evasion. In the end, the pair was able to settle the process with Anderson receiving $1 million from Salomon.

Although a high asset divorce can be expensive for many other reasons, the Internal Revenue Service does not bill spouses for their decision to part ways. During a divorce, spouses may transfer as much money and property between each other as they want to without having to pay gift or income taxes on the transactions. However, property division is only tax-free when both spouses are U.S. citizens.

Divorce property settlements are not taxable, but they may still result in tax consequences for divorced spouses. For example, if a spouse is awarded valuable property in a divorce that they go on to sell, they will have to report the earnings from the sale to the IRS. If a spouse is awarded alimony payments in a divorce settlement, these payments also must be reported to the IRS as income.

A person who is going through a divorce where there are significant marital assets may want to talk to a lawyer about what property division scenario would benefit them the most. By taking both the value of property and the tax consequences of owning property into account, a divorcing person may be in a better position to pursue a settlement that will not result in a large tax burden down the line.

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