Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

The Matrimonial StrategistKickerFeaturesSectionsNewsLJN Newsletters

Unspecified Tax Purposes in Marital Settlements

By Thomas R. White

For tax purposes, “alimony” payments meeting the definition in ' 71 of the Internal Revenue Code (IRC) are taxable to the recipient and deductible by the payor. When the definition of alimony in ' 71 was amended in 1984, it was said that the purpose of the amendment was to eliminate the dependence of the definition of taxable alimony on state law dealing with spousal support. Before then, alimony was taxable to the recipient when “received ' in discharge of ' a legal obligation which, because of the marital or family relationship, is imposed on ' the [payor] ' ” The statutory requirement of a “ legal obligation” was interpreted to mean the payor's obligation to support the payee, and that, in turn, required examination of state law and the specific provisions in the settlement agreement or divorce decree (“divorce instrument”) to determine the source of the obligation. Often, this inquiry required consideration of extrinsic evidence to identify the purpose of the payments in question. Under current law, ' 71(b) of the IRC sets out requirements that are said to be objective and independent of state law, obviating the “subjective” search for the support obligation under prior law.

This article discusses two of those requirements: ' 71(b)(1)(B), which provides that a cash payment is taxed to the recipient as alimony when, inter alia, the “divorce or separation instrument does not designate such payment as ' not includible in gross income ' and not allowable as a deduction ' “; and ' 71(b)(1)(D), which provides that the payment is taxable when, inter alia, “there is no liability to make any such payment for any period after the death of the payee spouse, and there is no liability to make any payment ' as a substitute for such payments after the death of the payee spouse ' .” (Emphasis supplied.)

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Transfer Tax Implications on Real Property Leases Image

The real property transfer tax does not apply to all leases, and understanding the tax rules of the applicable jurisdiction can allow parties to plan ahead to avoid unnecessary tax liability.