Alimony

[S T]

Have a new client that I am meeting with on Monday. Several phone calls back and forth as she is organizing her paperwork, and I might add "really messed up the 401K division, as they didn't include a QDRO order and rollover"

A do-it yourself divorce issue. Both the ex husband and the spouse (my new tax client) drew up their own divorce papers and property settlement.

Within the divorce papers and property settelement, it states that the ex-husband will pay the spouse $1,000 per month spousal support/alimony. Property settlement amongst others was a vehicle, that "under the property settlement section of the divorce agreement" states that the ex-husband will continue to make the auto loan payment on this vehicle until the loan is paid off.

The $1,000 per month spousal/alimony is a given, except ex-husband claimed on his return an extra $1,000 for one month that he did not pay for.

Question is the auto loan payment of $579 per month. Is this also considered spousal/alimony. I am thinking not! But I have been wrong before. It was not included under the spousal/alimony of the divorce agreement, only included under the liabilities to be paid by each party, under the property settlement.

How would you treat the $579 per month?? The ex-husband listed as spousal/alimony deduction on his return.

Thanks,

Sandy

[Kram BergGold]

I can see it as alimony

In Lasser's it is made clear that payments required by a divorce agreement to a third party can be alimony if it is so required by the terms of the divorce doc. So from what you say I think it is alimony. I don't think that it matters that the stipulation is under the heading of property settlements. The cash paymetns are not a property settlement.

[Gene V]

From Pub. 504
It might come under Payments to a third party. Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. These include payments for your spouse’s medical expenses, housing costs (rent, utilities, etc.), taxes, tuition, etc. The payments are treated as received by your spouse and then paid to the third party.
I’m think the car payments would come under the etc.

This agrees with Kram BergGold

[BOB W]

Car .......

...... payment is NOT alimony> just property settlement.

Please read TTB 12-12 second column top down 1 paragraph > "must be stipulate in writing that it is alimony"

[Acownt4it]

Depends

Lasser's pg. 597 Planning Reminder says: "Cash payments to a third party MAY be deducted as alimony if they are under the terms of a divorce decree or separation instrument."

Same thing Kram was saying but I look at differently. Since they had it under property distribution, they were not considering it alimony.

[jainen]

I was thinking

>>Same thing Kram was saying but I look at differently<<

I was thinking along similar lines yesterday but couldn't construct a strong enough argument. (You know I would never post anything that was simply my own opinion.).

I looked up Section 71(b), and it doesn't exactly say the alimony has to be designated as such in writing. It says it can't be designated as not alimony, a subtle distinction which is applicable in this case. Specifically, it says, "not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215."

My interpretation is that by designating the car payments as something other than alimony, the alimonee takes advantage of this rule and the alimoner can't double-dip, having presumably received comparable property in settlement.

[BOB W]

Can .....

...... Can you restate your opinion in plain language with a conclusion.

[jainen]

researching the code

<<..... Can you restate your opinion in plain language with a conclusion.<<

I conclude that you are more comfortable with the general issues described in The Tax Book than with the more individual interpretations supported by researching the code.

[BOB W]

Yes,

<<..... Can you restate your opinion in plain language with a conclusion.<<

I conclude that you are more comfortable with the general issues described in The Tax Book than with the more individual interpretations supported by researching the code.

And I can conclude that you have no opinion other than to state the code.

[S T]

Update on Alimony

For those that might be interested, met with the ex-wife(my t/p) and we talked about whether or not the auto loan payments by the ex-husband should be included in the alimony payment.

Based on a conversation that I had with her and all of the wonderful reply posts, she spoke to the ex-husband, and he acquiesed and said "yes" the auto loan payments probably were not spousal/alimony, and that he would amend his tax return to reflect the reduction of those amounts and that she (my t/p should not report them). I also advised her to obtain a copy of the amendment for her records.

Interpretations are different by all readers of information, and in this case, I think the ex might have thought she would not seek some professional help.

I found an excerpt from FTB.ca.gov/law that states "payments on a loan for an automobile awarded to the payor's former spouse in a divorce are not alimony where the loan was a joint obligation of the parties even though the payor was instructed by the divorce court to make the payments. (Luhamn, T.C. Memo 1970-81{29 T.C.M. 376]

Now on to the next issue with this client which is under another post.

Thanks to everyone for their replies.

Sandy

[Acownt4it]

Cool

Sandy. It is always nice when it goes on the side of your client, isn't it? One victory for today.
Good job digging into this for her. She will probaly become a staunch supporter of your services and abilities.