Articles Posted in Alimony

Published on:

Logue v. Comm’r, T.C. Memo. 2017‑234, 2017 WL 5713945 (2017)

 

(a) Facts: The parties entered into a premarital agreement.  The agreement provided, among other things, that the wife would receive, upon divorce, a lump sum of $100,000, plus $10,000 for each year the parties were married.

 

The parties married but divorced after four years.  A separation agreement required the husband to pay the wife $140,000, exactly the amount that the above provision would require for a four-year marriage.  The agreement further provided:

 

The parties each acknowledge that this agreement, and each provision of it, is expressly made binding upon the heirs, assigns, executors, administrators, representatives and successors in the interest of each party.

 

2017 WL 5713945, at *4.

 

A modified separation agreement then reduced the payment from $140,000 to $117,970.97 on the ground that the husband had already paid $22,029.03 in expenses for the wife.  The husband’s total liability, including the expenses, remained at exactly $140,000.  The modified agreement was incorporated into a Texas divorce decree.

 

The husband paid the wife the $117,970.97.  On his next tax return, he took an alimony deduction of $170,000.  Of this amount, $32,000 was for alimony paid to a prior spouse, and $140,000 was for the payments made to the wife.

 

The IRS disallowed the deduction above the $32,000 paid to the former spouse, and the husband petitioned for relief in the Tax Court.

Continue reading →

Published on:

Davidson v. Comm’r, T.C. Memo. 2018-38, 2018 WL 1611811 (2018)

 

(a) Facts: The parties were divorced by an Arkansas court, and the divorce decree divided the parties’ debt.  Within a few days after the decree was entered the judge sent the parties a letter, which stated:

 

When I made my ruling from the bench last Thursday, I failed to mention the following issues that should be included in the Decree of Divorce:

 

  1. The division of debt ordered from the bench shall be considered as support for Mrs. Davidson [Kelley] and shall not be dischargeable in bankruptcy[.]

 

2018 WL 1611811, at *1.  The court then entered a modified decree, which stated:

 

  1. ALIMONY: In light of the foregoing division of the debts, and real and personal property, and having reviewed all the primary and secondary factors of alimony the Court recited, the Court finds that it is not appropriate to award the Plaintiff [Kelley] alimony in this case. Further, given this Court’s division of the marital property and debt between the parties and because Mr. Davidson’s future income is too speculative to set any kind of time frame on when his income would have to improve for it to inure to the benefit of the Plaintiff [Kelley], the issue of alimony will not be held open to allow Plaintiff [Kelley] to reopen this case and file a petition for alimony in the future.

 

  1. BANKRUPTCY: The division of the debt ordered from the bench shall be considered as support for Mrs. Davidson [Kelley] and therefore shall not be dischargeable in bankruptcy.

 

Id. at *4.

Continue reading →

Published on:

by Carolyn Woodruff, attorney, CPA

As has been widely reported, Congress has repealed I.R.C. §§ 71 and 215, thereby eliminating the federal tax reduction for alimony.  In addition, Congress has repealed former I.R.C. § 61(a)(8), which expressly defined alimony as taxable income.

In tax years governed by the new law, alimony will be taxable income to the payor, and will not be taxable income to the payee.

The effective date of the change is as follows:

Published on:

Alimony is also known as spousal support and it refers to payments made by one spouse to support the other after separation or divorce. The payments may be lump sum payments or ongoing payments. Generally, post-separation alimony lasts until the divorce is concluded. However, a court may also award alimony after a divorce is finalized. In North Carolina, most spouses that were married 10 years or less don’t get awarded alimony for longer than half the marriage. Recent changes to the tax consequences of alimony under federal tax law will have a major impact in how alimony is negotiated in North Carolina.

 

Historically, alimony has been tax deductible for the paying spouse and had to be reported as income on the recipient’s tax return. In North Carolina, the payment had to be made pursuant to a written separation agreement or court order to be tax deductible and it also had to be in cash. The payment had to be made once the payer and recipient were not part of the same household. The alimony had to be paid within the year the payer was taking the deduction. The deduction could be taken regardless of whether the payer itemized deductions on his or her tax return. The former spouse’s social security number had to be included in the tax return or the deduction could be disallowed.

 

New federal tax laws will eliminate the spousal support deduction starting on January 1, 2019. Attorneys and judges have had to hurry to finalize accelerated divorces that were filed to beat the December 31 deadline. If you file before this deadline those who expect to pay spousal support will be able to deduct money from their taxable income each year, which can result in thousands in savings for higher-income tax filers.

Continue reading →

Published on:

Often people assume that if alimony is awarded, a husband will have to pay it to his ex-wife. However, based on consideration of certain statutory factors, alimony can also be awarded to an ex-husband and a wife may be required to pay it. In a recent North Carolina alimony appellate decision, a wife appealed from the court’s award of alimony to her husband. The couple had met online. The husband lived in India but moved to the U.S. to be with the wife. They married in India, but separated while living in the States. During the marriage, the wife allegedly subjected the husband to emotional and mental abuse.

The husband sued for divorce and alimony. In 2015, the appellate court had affirmed the lower court’s grant of divorce but reversed its award of alimony. In 2016, the lower court entered an order that awarded the husband alimony, among other things.

The wife appealed the award of alimony. She argued there was no subject matter jurisdiction for the alimony award, claiming that the lower court was required to recognize the annulment she got in India in 2011, one month after the husband sued for divorce. The appellate court explained that neither of the spouses was domiciled in India when she got the annulment, and so the lower court hadn’t made a mistake in not recognizing the annulment. In North Carolina, foreign divorces and annulments don’t need to be recognized where neither party had domicile in the jurisdiction that granted the annulment or divorce. It noted that domicile describes someone’s established and permanent home, and that even if someone has more than one residence, there is only one domicile. Domicile is changed by actual abandonment of some other domicile, intent to stay in a new place indefinitely or permanently or physical residence in a new place.

Published on:

Carolyn Woodruff, J.D., C.P.A, C.V.A.

Dear Carolyn,

I have received spousal alimony since a 2003 court order until death. I would like to get an increase because of the economy. My ex-spouse receives three times my social security and retirement. His home is paid for and he owes three motor vehicles. His social security and retirement from a big local company is great. I received zero from this after 38 years of marriage. He was in Management. What are my chances of getting an increase?

Carolyn Answers:

Published on:

Carolyn Woodruff, J.D., C.P.A, C.V.A.

Dear Carolyn,

I work and make a good income.  During our marriage, my wife worked for a while, but stopped when we had children.  She has and maintains a CPA license.  We have a 15-year-old with some discipline problems and ADHD.  We are divorcing, and I think she should go back to work.  She wants alimony.  Who is right?  Does she need to work, or can she just continue to be a leech?

– Anti-Leech

Published on:

Carolyn Woodruff, J.D., C.P.A, C.V.A.

Dear Carolyn,

My ex is receiving alimony, which I obviously do not want to pay.  She has a son, by another marriage, who is a heroin addict.  My ex-wife began dating shortly after our divorce, and she seems quite entrenched with this guy.  He stays over at my ex’s on some weekends, but he does still have his own apartment.  I know he has a key to my ex’s house, and I know he stayed there four weeks when the heroin addict was in rehabilitation.   My court order for alimony says that the alimony terminates upon cohabitation or remarriage.  Will the court terminate my alimony?  Is my ex cohabiting?

                – Sorry to be paying alimony

Published on:

Dear Carolyn,

My wife had an affair, and because I wanted to save the marriage for the children, I forgave her. That was about ten years ago.  Now, it is really not working, and I want out.  The last child has finished high school.  She spends too much money and she will not find a job.  She says I owe her alimony if I leave.  She has the same college degree I do.  Can she get alimony?  What about her affair?

I tried, but….just can’t do it any more….

Published on:

Dear Carolyn,

I am thinking about separating from my wife of 10 years. She is a doctor and makes a lot more money than me. I am a school teacher and make extra money coaching, but she still makes a lot more than me.  Neither of us are having an affair, but I am pretty miserable. We are both thirty-three.  She works all the time and I take care of our two children.  I also worked for two years while she finished her medical degree.  I hate to ask, could I get alimony as a man?  Our lifestyle has been great, and I would like to maintain that lifestyle as best I can. Thanks Carolyn.

 

Carolyn Answers:

Very interesting question, but the answer is quite simple. Men can get alimony on equal footing with women, at least theoretically. This issue was resolved by the United States Supreme Court in 1979 in the noteworthy case of William Orr v. Lillian Orr.  In Orr, the Supreme Court held that an Alabama statute that made alimony only available to women was unconstitutional under the Fourteenth Amendment of the United States Constitution, which provides for equal protection. An interesting twist to the Orr situation was that Mr. Orr did not want alimony from Ms. Orr; rather Mr. Orr was upset that women never had to pay alimony under the Alabama statute. Mr. Orr’s argument that the statute discriminated against men won.

Some men do get alimony in North Carolina, but there are vastly more reported cases of women receiving alimony. Times are changing. I personally believe toward more men receiving alimony. The thirties age group has a fairly typical scenario in divorce of both spouses working, or at least no one has been out of the workforce for 20 years.  Neither of you are out of the work force.  Contrast this with divorces of persons in their late forties or fifties where one spouse did drop out of the public labor force to raise children—those dependent spouses who haven’t worked publicly for 20 years generally receive alimony if the supporting spouse has the ability to pay. Continue reading →