If you were fortunate enough to buy stock in Apple Inc. in early 2009, you might have paid $13 per share. It’s now worth $150.

If you’re getting a divorce holding Apple shares with a substantially lower-than-market cost basis, you must plan your trial evidence or settlement to deal with the embedded capital gains tax exposure. In the example above, the gain would be $137 per share. When sold, under current tax laws, a capital gains tax of perhaps tens of thousands of dollars or more could be incurred.

If you settle this issue, you may negotiate the impact of capital gains on the spouse retaining the shares. It will always be easier, fairer, to simply divide the shares, but care must be taken to divide it “traunch” by traunch; to divide each group of shares purchased at any one time. In that way, the spouses will be assured that not only will today’s fair market value be the same, but so will the embedded capital gains issue.

If you don’t settle, the issue will be far more difficult. The court may not recognize nor account for the potential tax liability incurred if and when the stock as sold. The transfer from one spouse to the other incident to the divorce itself is not viewed as a taxable event. Even if the court computes the transfer using the current fair market value, the transferring spouse reports no capital gains; the recipient spouse keeps the original cost basis. If and when the recipient sells the shares, the recipient will bear the entirety of the capital gains tax, computed on the gain over the original cost basis.

A court may well altogether disregard the entire contingent, speculative capital gains tax liability. Take the July 26, 2017 of the Appellate Division, Second Department, in Galanopoulos v. Galanopoulos. There, among other rulings, the Court upheld the decision of Westchester County Supreme Court Justice Linda Christopher, herself just appointed to the Second Department, to decline consideration of the husband’s potential tax liabilities upon a future sale of real property.

There was no evidence of an impending sale of that property, and it would be inequitable to saddle the plaintiff with any capital gains tax liability that the defendant might incur upon a sale of the property at some point in the future Moreover, where, as here, a party fails to offer any competent evidence concerning tax liabilities, the court is not required to consider the tax consequences of its award.

For the trial court to consider impacting the embedded tax liability may require proof that the sale is not speculative, but imminent, if not necessary. Moreover, expert testimony projecting the tax impact would appear needed. Cavaluzzo v. Cavaluzzo, 121 A.D.3d 538 (1st Dept. 2014); Wechsler v. Wechsler, 58 A.D.3d 62, (1st Dept 2008).

In Galanopoulos, Olivia T. Marotta and John A. Pappalardo of Farber Pappalardo & Carbonari, of White Plains, represented the wife. Constantine G. Dimopoulos and Gus Dimopoulos of Maniatis & Dimopoulos, P.C., of Tuckahoe, representted the husband.