Alimony

[JoeW]

I have a new client, he just got divorced in 2007, and he paid for his ex wife legal fees and paid off her student loans as ordered by the courts. He wants to count this as alimony and deduct this as an adjustment from income. I originally did not think this could be treated as alimony, but after some research found that payments to a third party on the behalf of a former spouse under the terms of a divorce can be alimony. I am still not positive about this. Can this be alimony? Any suggestions.

[taxmandan]

Sounds more like settlement of marital assets

But might qualify if a written request from the recipient for the payments to the third party was done (doesn't sound like that's the case) in lieu of alimony payments. Does your client have alimony payments other than this money?

[JoeW]

Yes, he paid her around 13,000 in alimony and wanted to count her legal fees and student loans he paid as alimony too. I did not think it was alimony, but a settlement of assets from the divorce, but I thought I would get other opinions.

[jasdlm]

In my opinion, you need to read the divorce settlement. Generally, payments to 3rd parties (mortgage companies, etc.) are deductible as Alimony only if the agreement clearly states that they are alimony. Under Treasury Regulation 1.71-1T, Q-7 (I think) it states that the payee must sign a written statement that the parties intend for the payments to be treated as alimony (assuming the property settlement agreement didn't already define it as such). If you report it as deductible for your client, obviously it is taxable to the spouse. If nothing is signed by the spouse agreeing to this and it is not in the divorce decree, I believe the deduction would be disallowed.