Articles Tagged with alimony

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Dear Carolyn,

My husband is having an affair with his secretary and I want to get that woman.  I kicked him out of our home on New Year’s Day when he made an excuse that he had to go by the office for something (something? Right?), and my detective caught them red-handed.  I hear about alienation of affection.  Do I qualify?  How much do you think I’ll get?

 

Carolyn Answers:

While you need to have a family lawyer go over your evidence, you may have a claim for both criminal conversation AND alienation of affection against the secretary.  Alienation of affection requires (1) that you and your spouse had a genuine marital relationship; (2) that your spousal love was destroyed; (3) that the secretary caused the breakup of the genuine marital relationship; and (4) that you have damages.

Criminal conversation does not have to do with any crime we actually punish today. The requirements for criminal conversation are two-fold:  (1) sex (2) with someone’s spouse.  That’s it.

No one can really say how much you might get. Juries generally decide these issues, and juries can really vary and view these issues differently.  It is attention-grabbing that there have been some very large awards in North Carolina reported in both the North Carolina Supreme Court as well as the North Carolina Court of Appeals and literature.

Affairs also can affect alimony, as in the question below:

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Dear Carolyn,

My soon to be ex-wife lied under oath in Guilford County Court for personal gain (money). She over-stated expenses and I am paying P.S.S. Can I charge her with perjury and sue her?

Thanks!

~ P.J.

 

Dear P.J.,

Unfortunately, this is a frequently asked question in family law and divorce cases.  It seems that, almost always, someone thinks one side or the other is lying.  For all readers’ information, P.S.S. is Post Separation Support, a temporary form of alimony.  The question is as follows:   what can you do about the false statement?

This answer will first discuss your allegation of perjury.  Then, secondly, the answer will discuss possible civil remedies and suggestions for your divorce.

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In Part 1, we discussed that proving cohabitation in North Carolina is not an easy task. There have been multiple North Carolina Court of Appeals cases where the dependent spouse and new flame had been dating for years, were blending finances, were vacationing together, and living together as much as five days a week; yet the Court found there was no cohabitation. The most important thing to keep in mind when trying to prove cohabitation to the court is your evidence.

When the Court reviews the evidence of cohabitation, it will engage in a two-part test. If the objective evidence of cohabitation does not conflict with other evidence, the court does not have to consider the subjective intent of the dependent spouse and new romantic interest. However, if there is conflicting objective evidence, then the Court must look to the subjective intent of the dependent spouse and new romantic interest. Bird v. Bird, 363 N.C. 774, 688 S.E.2d 420 (2010).

Examples of objective evidence of cohabitation includes externally verifiable phenomena, such as bank statements in both parties’ names, joint lease agreements, joint utility bills, cell phone records and text messages showing communications between the parties, emails between the parties alleged to be cohabiting, photographs of the parties together, or investigative reports detailing the movements and actions of the parties alleged to be cohabiting.

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If you are going through a separation and divorce in North Carolina, one topic that always arises is the dreaded “A” word: Alimony. No one wants to be responsible for supporting their soon to be ex-spouse, and if they are going to be responsible for that support, they want to know what can make the obligation (a.k.a. nightmare) end.

In North Carolina, several circumstances will terminate the alimony payments: the death of the supporting spouse, the death of the dependent spouse, or the remarriage or cohabitation of the dependent spouse. The death of either party or the remarriage of the dependent spouse are pretty clear in their definitions, but there is some confusion about what exactly is considered cohabitation. Although statute defines cohabitation, the facts and circumstances of each case determine whether cohabitation has truly occurred.

A discussion of the elements of cohabitation follows, but at the outset, it is important to understand the reasoning of why cohabitation terminates Alimony. It may seem that it is to punish the dependent spouse or to keep the dependent spouse from having a dating life after their marriage ends, but this is not the case. The North Carolina Court of Appeals in Setzler v. Setzler, 781 SE2d 64 (NC App., 2015) explained that terminating alimony due to cohabitation is not punishment of the dependent spouse, but rather is a financial consideration. The Court reasoned that if the dependent spouse has entered into a serious relationship that implicates their finances, they could be avoiding marriage in bad faith to keep the alimony coming. With that in mind, let us turn to the elements of cohabitation.

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Anderson v. Comm’r, T.C. Memo. 2016-47, 2016 WL 976816 (2016)

Facts: An Alabama court entered a pretrial order in a divorce case, requiring both parties to “[m]aintain status quo as to payment of house note or rent, utilities, food, necessities, fixed credit obligations, ” 2016 WL 976816, at *1. After the order was entered, the husband transferred at least $1,000 each month to the wife “for her spending money and other things that I had previously paid for.” Id.

The husband took an alimony deduction for the amounts paid. When the IRS did not allow the deduction, the husband then appealed to the Tax Court.

Issue: Were the payments alimony for federal tax purposes?

Answer to Issue: Summary of Rationale: The first requirement in the federal definition of alimony states that it must be received under a “divorce or separation ” I.R.C. § 71(b)(1)(A). A “divorce or separation instrument” includes “a decree of divorce or separate maintenance or a written instrument incident to such a decree.” Id. § 71(b)(2)(A). A pretrial order is not a divorce decree, but it is a written instrument incident to such a decree. Thus, the premarital order was a divorce or separation instrument.

The pretrial order directed the husband to maintain the status quo. The husband testified that the payments were intended to cover things he had previously paid for. He was therefore maintaining the status quo, as required by the order, so that the payments were received under a court order. There is no requirement that the divorce or separation instrument list the specific exact amount of support required.

The pretrial order did not specify whether the payments stopped upon death. But the payments occurred periodically, so they were periodic alimony, and Alabama case law stated clearly that periodic alimony ceases upon the death of the payee. Because the payments stopped upon death, they were alimony for purposes of federal tax law.

Lesson: Temporary support, alimony pendente lite, or postseparation support can all constitute alimony under federal tax law, so long as it is clear from the language of the agreement or the order, or from state law if the order is silent, that the obligation terminates upon death of the payee.

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Wolens v. United States, 125 Fed. Cl. 422 (2016)

Facts: The parties married in New York, but divorced in England. Their English divorce decree provided for a large initial payment to be made by the husband to the wife, followed by annual payments of £441,667 in 2007, 2008, and 2009. (The 2009 payment was one pound less.)The husband’s initial tax return did not claim the 2007 payment as alimony. He later filed an amended return which did claim the 2007 payment as alimony. The IRS disallowed this return and refused to issue a refund.

The husband then filed suit in the Court of Federal Claims to obtain the refund. The IRS then moved to dismiss the action, arguing that the husband could not establish that the 2007 payment terminated upon death of the payee. The husband filed a motion for summary judgment, arguing that the payments clearly did terminate.

Issue: Was the 2007 payment alimony?

Answer to Issue: The answer depends upon material issues of fact; the motion to dismiss and motion for summary judgment are therefore denied.

Summary of Rationale: If the 2007 payment did not terminate upon death of the payee, it clearly could not be alimony for federal tax purposes. The agreement itself was silent on this point. The key question was therefore whether the payment automatically terminated at death under the controlling domestic relations law. “[A]lthough the government has shown that the term ‘lump sum’ is typically associated in the United Kingdom with a division of marital assets, it has not established that this is the only reasonable interpretation” of the agreement. 125 Fed. Cl. at 430. In particular, the annual payments might be construed together as a periodic obligation, instead of being construed separately as individual lump-sum obligations. The IRS’s motion to dismiss was therefore denied.

The husband’s motion for summary judgment was also denied, for essentially the same reason; the decree was ambiguous, and its construction was therefore an issue for trial. Continue reading →

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By: Dana M. Horlick, Attorney, Woodruff Family Law Group

 

Muniz v. Comm’r, T.C. Memo. 2015-125, 2015 WL 4126356 (2015)

(a) Facts: A Florida separation agreement provided that the husband would pay wife $1,000 per month in alimony. The husband did not pay on time, and the court entered an enforcement order directing the husband to pay $6,000 in alimony due under the agreement. The husband paid this amount.

The parties then entered into a second agreed order, which required the husband to pay the wife $45,000 in settlement of all obligations under the separation agreement. “[The wife] testified at trial that the $45,000 payment was a settlement for attorney’s fees and the division of marital assets and was not intended to be alimony.” 2015 WL 4126356, at *1.

The husband paid the $45,000 and took an alimony deduction. The IRS disallowed the deduction and assessed a deficiency.

(b) Issue: Was the husband entitled to an alimony deduction?

(c) Answer to Issue: No.

(d) Summary of Rationale: The $6,000 payment made by the husband under the first agreed order was a full payment of all alimony. Also, the amount of the $45,000 payment did not match in any discernible way the amount of alimony required by the agreement. The $45,000 appears to be a property settlement.

Also, even if the $45,000 were intended as alimony, it would not be alimony for federal tax purposes unless liability ends upon death of the payee. Nothing in the agreed order or Florida law suggests that liability for the $45,000 would terminate upon death. On the contrary, Florida law provides that lump-sum alimony survives death. Thus, even if the $45,000 were intended as lump-sum alimony, the husband would still not be entitled to an alimony deduction.

 

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Milbourne v. Comm’r, T.C. Memo. 2015-13, 2015 WL 393040 (2015)

(a)  Facts: A husband and his wife separated. She proposed a separation agreement, which required him to pay $6,000 per month in alimony. The husband refused to sign this agreement, as he did not want to pay more than $2,500 per month in alimony.

The parties could not agree upon an amount of support and no agreement was initially signed. While the parties were negotiating, the husband paid the wife $36,000 in monthly payments of varying amounts, usually $2,000 but sometimes $4,000 or $5,000. After a total $36,000 had been paid, the parties signed an agreement calling for support of $4,500 per month, with certain possible future reductions.

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Iglicki v. Comm’r, T.C. Memo. 2015-80, 2015 WL 1886010 (2015)

(a)  Facts: A Maryland separation agreement required a husband to pay $735 per month in child support to a wife. If the husband defaulted on child support, he would immediately become liable for $1,000 per month in spousal support. Liability would continue until the wife died, the husband died, or the husband made 36 payments. The agreement was incorporated into a Maryland divorce decree.

The husband defaulted on child support and thereby became liable for spousal support. The husband’s wages were eventually garnished by a Colorado court. He took an alimony deduction for the total amount paid. The IRS disallowed the alimony deduction and assessed a deficiency

(b)  Issue: Was the husband entitled to an alimony deduction? Continue reading →

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Watch out for those hurried, last minute North Carolina agreements that link alimony and child support termination; you could get an unintended tax consequence and the loss of the tax deduction.

While the Johnson case, discussed herein, is not a North Carolina case, it could be.  Guys and gals, you simply cannot link alimony reductions to a child-related event.  It doesn’t work; that is, if you want the deduction.

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