Articles Tagged with alimony

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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.

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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:

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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

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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

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Dear Carolyn,

My ex is all over Facebook about what she did with the kids during Spring Break. She apparently took some young woman with her to babysit so she could spend more time with her boyfriend on the Florida beach. She posted my little boy “buck naked” on the beach on Facebook. She posted her “babysitter—young woman” drinking beer with at least a dozen empty beer cans in the background. She posted a picture of her boyfriend and her entwined on the beach on a blanket. And to top it all off, she posted a picture of her new engagement ring from him, and we are not even divorced. I have filed for custody of the two children. She wants alimony. Are the pictures I downloaded from Facebook admissible? Can I make her remove the nude picture of my son as I am worried about perverts? Do these Facebook pictures help me in my quest for custody and no spousal support? I am frustrated with the whole process.

Dear Frustrated,

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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….

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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:

a. You must have a qualifying decree or instrument;

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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.

Sections incorporating all three subparagraphs of the definition of divorce or separation instrument Post-2018.

The two sections of TCJA that adopt all three subparagraphs of the definition of divorce or separation instrument post-2018 are as follows:

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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.

The law before TCJA will be referred to as “pre-2019.”

In this first section, we’ll look at what a divorce or separation instrument is.

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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.

This article is Part I of three parts. Part I deals with the basics of the alimony taxation changes under the Tax Cuts and Jobs Act (“TCJA”), referred to herein as the “new Alimony Statute.” Multiple sections of the Internal Revenue Code related to alimony are changed under the TCJA. The new Alimony Statute is contained in Section 110151 named “Repeal of Deduction for Alimony Payments” in PL 115-97, HR1, December 22, 2017, 131 Stat 2054.  When I refer from now on to the “old Alimony Statute,” I am referring mainly to Internal Revenue Codes Sections 71 and 215 as they existed before the TCJA.

Part II will deal with ancillary federal tax considerations of the new Alimony Statute, of which there are many.  Part III will discuss considerations of the new Alimony Statute under North Carolina domestic relations law and explore creative possibilities for the use of the new Alimony Statute.