Count as alimony

[thomtax]

Client has to pay ex-wife $390 per week plus 20% of all bonuses earned. On the typed decree, it was modified in pen to show that the $390 per week is divided with $240 for child support and $140 for alimony. The breakdown of the bonuses is not discussed.

What is your opinion of multiplying the amount paid from the bonus times the same percentage as the $150 is of the total of $390 and counting it as alimony. As I said, the decree is silent on this point.

Thoughts and ideas please.

LT

[Burke]

I would be hesitant to make assumptions. Was the altered document the one actually filed with the court? Initialed, etc? Who made the changes? Anyone could have done that. A lawyer would have typed up a new document or codicil.

[AJsTax]

First reaction

My first reaction is that anything over the $240 child support is alimony. I am not sure of other states, but here child support is always set at $ per month. So if the decree does not say that the bonus money is not to be considered alimony, then it most likely is.

And I have seen a lot of decrees with changes made in pen and initialed by both parties or the attorney. Just as binding if they signed on the last page. I have faced this type of situation and we usually call it alimony until one of the parties can prove otherwise. Sometimes it shows a real glaring problem that was overlooked by the attoneys. so many just dont understand the tax implications of what they write in the papers.

[thomtax]

I would be hesitant to make assumptions. Was the altered document the one actually filed with the court? Initialed, etc? Who made the changes? Anyone could have done that. A lawyer would have typed up a new document or codicil.

Burke, I hate to seem to be disagreeing with you, but this is actually the lawyer's handling. The agreement was typed out and ready on the morning for final disposition. Several agreed upon changes were made to the wording and handled in the write in method. The judge gave them one hour to get things finished or go to court for a hearing, trial, or whatever you call it in divorce trial. This document has been back before court workers, with the write ins, and accepted without comment, since it matched their copy. This is apparently a common practice in that area. And when the lawyer is charging $250 per hour, few people encourage them taking the additional time.

LT

[Burke]

As long as you know that, I don't have a problem with it, although I would have hoped it was at least initialed by the parties. And I agree with A-J's response about the treatment of bonus payments as alimony if the decree is silent on the matter. See TTB page 12-12.
"Payments are alimony if ALL of the following are true: .....Payment is not designated in the instrument as 'not alimony.' "

Also, see paragrah at bottom re: designating payments as "not alimony." Spouses can agree not to treat the bonuses as such. A copy of the written agreement needs to be attached to the tax return.

[thomtax]

Thanks - I had thought that section was about education, student loan interest, etc and did not find that part about alimony. That pretty much covers what I need.

Thanks again,
LT