Tax effecting inventory items means to put them on the inventory at their after-tax values. Some people want to do this. But it is a bit tricky and never, in my opinion, is it accurate.
Example: The balance in a bank account is not subject to income tax upon withdrawal. But the contents of a traditional IRA or 401(k) account will be subject to income tax upon withdrawal. In this example, to tax effect the retirement account is to attempt to compare apples to apples.
However, the tricky part comes in with the calculation of the future taxes on the retirement account.
Shall we assume the retirement account is drained and taxed at the time of divorce? I think not, since that is usually unlikely. Shall we assume the retirement account is drained and taxed when one spouse retires? Which spouse? And when will that be…. for certain? At what tax rate shall we tax the retirement account withdrawals? What will the tax rates be at that point in the future? What deductions and credits will be used by the spouse (which spouse?) at that future point?
If we are all in an agreeable mood, we could agree on some assumptions. But those assumptions could be wildly inaccurate when the future arrives.
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