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Not legally enforceable? It's still alimony!


In order for payments to qualify as alimony alimony, in law, allowance for support that an individual pays to his or her former spouse, usually as part of a divorce settlement. It is based on the common law right of a wife to be supported by her husband, but in the United States, the Supreme Court in 1979 , certain requirements must be met. The payments must be in cash, and pursuant to a divorce, separation or written agreement between the spouses; they must terminate at the death of the recipient; and they must not be designated as something other than alimony in the agreement. In addition, the parties must be living apart when the payments are made. The Tax Court recently issued a ruling that specifically addressed the written-separation-agreement portion of the definition.

Ms. Dato married Mr. Nodurft in 1993. Unfortunately, it was not a match made in heaven, as they divorced several years later. Prior to the divorce, however, they had entered into a separation agreement that provided, in part,

* They would live separately and apart "for the rest of their natural lives."

* Mr. Nodurft would pay Ms. Dato-Nodurft $1,505 per month in spousal support spousal support n. payment for support of an ex-spouse (or a spouse while a divorce is pending) ordered by the court. More commonly called alimony, spousal support is the term used in California and a few other states as part of new non-confrontational language (such  until their divorce became final.

* If Mr. Nodurft failed to make these payments in a timely fashion and his wife had to hire an attorney to enforce the agreement, he agreed to pay the attorney fees.

* They would file joint returns for any year in which they were still married and eligible to do so under the tax law if it was financially advantageous to do so. The agreement provided for the division of tax obligations and refunds if and when joint returns were filed.

The case involved the tax year 2000, during which Ms. Dato-Nodurft filed a separate return claiming single tax status and failed to include in her income $18,608 of payments received under the agreement. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws.  assessed the additional amounts due on the return.

Result. For the IRS. Ms. Dato-Nodurft contended that because she and Mr. Nodurft were not legally separated during tax year 2000, the payments were not alimony. Further, she contended the separation agreement was not legally binding and therefore the payments made under it were not alimony. The Tax Court disagreed with both arguments.

Of Ms. Dato-Nodurft's first argument, the court said, simply, "We do not agree." What is interesting is that authoritative support for her position exists even though she didn't provide it. Regulations section 1.71-1(b)(2)(i), which defines the written separation agreement, says in part "if the wife is divorced or legally separated subsequent to the written separation agreement, payments made under such agreement continue to fall within the provisions of section 71(a)(2)"

In Bogard, 59 TC 97, payments made by a husband to a wife were determined by the Tax Court to be alimony. The court found that the written separation agreement was valid because, although it did not specifically state the two intended to remain separate and apart, they actually had lived apart during the period at issue. This case, however, would not be relevant if a "legal separation" were required for payments to qualify as alimony. A statement of intent to live apart from one's spouse, if the two were already legally separated, would be quite redundant.

The court concentrated its opinion on Ms. Dato-Nodurft's second argument, which was that the payments were not alimony since the agreement was not legally enforceable. She offered little evidence of this, and as mentioned above, the regulations clearly state that a written separation agreement does not have to be legally enforceable to qualify under section 71(a)(2). Specifically, regulations section 1.71-1(b)(2)(i) states, "Such payments are includible in the (recipient's) gross income whether or not the agreement is a legally enforceable instrument." This portion of the regulation has been supported on judicial review.

Both the Tax Court and the Seventh Circuit Court of Appeals had ruled in an earlier case, Richardson v. Commissioner (125 F3d 551, 9/12/1997), that even though a state court had found a written separation agreement invalid and unconscionable Unusually harsh and shocking to the conscience; that which is so grossly unfair that a court will proscribe it.

When a court uses the word unconscionable to describe conduct, it means that the conduct does not conform to the dictates of conscience.
, it was still valid. Although the agreement was very unfair to Ms. Richardson, she had accepted money from her husband for her separate maintenance and support and knew that it was being paid according to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 the agreement they had signed. For this reason, the payments were considered alimony even though the agreement was deemed invalid under state law.

In its conclusion, the Tax Court reinforced the position that a "legal separation or divorce" was not a prerequisite pre·req·ui·site  
adj.
Required or necessary as a prior condition: Competence is prerequisite to promotion.

n.
 to the definition of alimony payments under IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel.  section 71. With respect to the definition of alimony, CPAs should determine whether a written separation agreement exists, but they need not determine whether the agreement is legally enforceable or whether a legal separation or divorce has been granted.

* Antoinette J. Dato-Nodurft v. Commissioner, TC Memo 2004-119.

Prepared by Robert L. Severance The act of dividing, or the state of being divided.

The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when
, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , CIA CIA: see Central Intelligence Agency.


(1) (Confidentiality Integrity Authentication) The three important concerns with regards to information security. Encryption is used to provide confidentiality (privacy, secrecy).
, CFE CFE Conventional Forces in Europe (treaty)
CFE Cash Flow to Equity (finance/accounting)
CFE Comisión Federal de Electricidad (México)
CFE Certified Fraud Examiner
 lecturer, department of accounting, Texas State University, San Marcos San Marcos (săn mär`kəs).

1 City (1990 pop. 38,974), San Diego co., S Calif., a northern suburb of San Diego; settled 1880s, inc. 1963.
, and Cheryl Metrejean, CPA, PhD, assistant professor of accounting, Georgia Southern University Georgia Southern University, established 1906, is a regional university located in Statesboro, Georgia, USA, and part of the University System of Georgia. It is the largest center of higher education in the southern half of Georgia and is the sixth largest institution in the , Statesboro.
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Author:Metrejean, Cheryl T.
Publication:Journal of Accountancy
Date:Jul 1, 2005
Words:802
Previous Article:Guarding marital deductions.
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