Articles Posted in Tax

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Leslie v. Comm’r, 725 F. App’x 597 (9th Cir. 2018) (unpublished)

(a) Facts: A husband and wife signed a separation agreement to settle a California divorce case.  In a section entitled “Spousal Support,” the agreement awarded the wife $7,000 per month, stating expressly that it would end upon either party’s death.

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Hexum v. Comm’r, 721 F. App’x 512 (7th Cir. 2018) (unpublished)

(a) Facts: The parties were divorced in Illinois.  The wife remained in the former marital home, and the husband was ordered to pay the mortgage.  Upon an eventual sale of the home, the parties were to split the net proceeds. Continue reading →

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As has been widely reported, Congress has repealed I.R.C. §§ 71 and 215, thereby eliminating the federal tax reduction for alimony.  In addition, Congress has repealed former I.R.C. § 61(a)(8), which expressly defined alimony as taxable income.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

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

Dear Carolyn:

My ex and I share the children fifty-fifty.  We have three children.  I make approximately $25,000 more than the other parent.  I pay child support even though I have them half the time.  Our child support order says nothing about who gets the dependency exemptions, and I get in a fight with my ex every year over the dependency exemptions.  Who should get the three dependency exemptions?

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

Forget it!

Forget about the alimony deduction for all new decrees or instruments post-2019. (See Part I for modification of pre-2019 alimony orders and agreement, as modification has a separate set of rules.) The deduction is gone absent a congressional miracle. That means on December 31, 2018, or before you must have alimony that qualifies under IRC Section 71 before it is repealed. The alimony must meet the terms of Section 71, pre-TCJA and pre-2019, which are as follows: Continue reading →

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

Previously, we examined the paragraph and subparagraphs defining “divorce or separation instruments.” Now let’s take a look at which sections of TCJA incorporate these subparagraphs.

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

The repeal of the alimony tax sections for the inclusion of income and deduction has an ancillary impact on other divorce tax issues. The effective date for all ancillary issues discussed in this article is December 31, 2018, the same as the alimony repeal. These December 31, 2018, changes shall be referred to herein as “post-2018” changes. Continue reading →

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

Divorce was hard enough, and now alimony tax reform. Do you feel good or bad about alimony? No matter your answer, this alimony tax reform revolutionizes the divorce arena, and you need to know how it may affect you and your clients. Judges need to know how it might affect those whose appear before them as litigants. So let’s dig in. Continue reading →

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Yancey v. Comm’r, T.C. Memo. 2017-59, 2017 WL 1289451 (2017)

Facts: A husband and wife filed joint returns. The returns were prepared by the wife. The returns understated the amount of tax due, mostly because they wrongly double-counted certain gambling losses incurred by the husband.

The IRS assessed a deficiency. The wife filed a petition for innocent spouse relief, the IRS denied it, and the wife appealed to the Tax Court. Continue reading →

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Dear Carolyn,

I think my husband and I may be getting separated and divorced, and I am concerned about our 2016 tax return, which has not been filed yet. The tax return is under an extension.  My husband has a small business in Greensboro, and I have no idea if he reports all of the income in the business.   I have heard that I can be responsible if I sign the return.  He never gives me a copy.  Do you have any thoughts on this issue?  Do I have to worry?

~ Worried and in the Dark Continue reading →