Wandering Tax Pro On The Tax Aspects Of Divorce

If You Say It Is Not Alimony It Is Not Alimony – If You Say It Is Alimony Maybe It Is

I had a problem with claiming an alimony deduction for a client based on erroneous wording in a divorce agreement. It dragged on for a long time, and was finally resolved in my client’s favor only after bringing in the Taxpayer Advocate Office.

The problem arose from the wording in the “Dual Judgment of Divorce with Property Settlement Agreement”. It first stated that –

“The parties expressly waive past, present and future alimony against one another.”

But this was followed by –

“The Husband shall pay to the Wife the sum of $650.00 per month which should be applied to pay the monthly rent for {the ex-wife’s apartment}. The balance should be used to defray the cost of insurance or other expenses related to this property.”

My argument was that this $650.00 per month payment qualified under all these conditions –

• The payments were made periodically by the taxpayer in the form of a check.

• The payments were required by the divorce decree.

• The taxpayer and his ex-spouse did not live in the same residence at any time during the year.

• The payments were not for the support of a dependent child.

• The taxpayer and his ex-spouse did not file a joint return for the year.

I further pointed out that the payments were not –

• Child support.

• Noncash property settlements.

• The spouse’s part of community property income.

• Payments made to the ex-spouse for the use of the ex-spouse’s property.

• Payments for the upkeep of property owned by the taxpayer.

The problem probably would not have arisen if the agreement had been worded –

“The parties expressly waive past, present and future support payments against one another.”

And the agreement did not specifically state that payments would cease upon the death of the ex-wife, although it did say –

“The Husband’s obligation to pay this support shall terminate upon either the expiration of ten (10) years from the date of the Judgment of Divorce or upon Wife’s remarriage of upon the Wife being the fee simple owner of this property or other property as a primary residence.”

Another “or” – “or upon the death of Wife” – should have been included.