[Dueller]

Diusclaimer: I am not a tax atty and not licensed in your jurisdiction.

That being said she does need to consult a tax atty or CPA before signing.

GENERALLY speaking any transfer of property from one spouse to another incident to a divorce is not a taxable event under federal laws (State tax laws generally follow in line with federal laws). HOWEVER, transfers from one spouse's IRA /401K, 403b etc (i.e., retirement accounts) are not usually taxable IF the money never hits her hands and goes straight from his IRA/401k into an IRA in her name. This is done thru a QDRO (Qualified Domestic Relations Order) by the divorce court. Your example does not contain enough info....if he is transferring from his IRA/401k directly to her it will likely be taxable if it is transferred directly to her and not into a retirement acct for her. However, if he liquidates it to pay a property settlement other than merely equitably dividing retirement accounts, HE may be liable for the taxes and penalties for his withdrawal depending on his age, income etc. She should also be cautioned against taking alimony in lieu of a property settlement as alimony is generally traxable to her and deductible by him.

As far as filing status, she will file as single for TY 2007 if the divorce is final by 12/31/07.

Bottom line...talk to an expert. Oh yeah...it is not unusual for a divorce lawyer to include language disclaiming any expertise on tax advice.