Tax strategies for divorce.
Few experiences in life are as emotionally and financially complex as a divorce. While we live in an era where divorce has become a common phenomenon, most individuals are not prepared to cope with the legal, tax and accounting
intricacies that characterize the procedures necessary to terminate a marriage. Needless to say, the wise counsel of both accountants and lawyers plays an integral role in helping to guide the parties through a smooth dissolution of all former legal relationships. Proper planning strategies must also take into account settlement provisions dealing with property accumulated during the course of the marriage, as well as who shall assume the former financial obligations of the marriage. In this article, we will focus on the fundamental issues that the accountant must be familiar with in order to provide competent and professional advice.
Various statutory rules have been promulgated prom·ul·gate
tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates
1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce.
2. to determine whether or not spouses who are in the process of getting a divorce are still eligible to file a joint tax return with its inherent tax benefits. The filing status of an individual is determined as of the last day of the tax year. If an individual is considered unmarried at the end of the year, then his or her filing status may be either single or head of household. Taxpayers are considered unmarried for the entire tax year if either of the following applies: 1. The taxpayer has obtained a final
decree of divorce or separate
maintenance by the last day
of the tax year.(1) The
applicable state law where the
taxpayer resides will determine
whether the individuals are divorced
or legally separated.
Exception: If the taxpayers obtained a divorce in one year for the sole purpose of avoiding the so-called marriage penalty by allowing the taxpayers to file as unmarried single individuals, and at the time the taxpayers intended to and did remarry remarry
[-ries, -rying, -ried] to marry again following a divorce or the death of one's previous spouse
Verb 1. each other in the next tax year, then the taxpayers must file as married individuals at year end.(2) 2. A taxpayer will also be considered
as unmarried at year end if
they obtained a decree of annulment annulment
Legal invalidation of a marriage. It announces the invalidity of a marriage that was void from its inception. It is to be distinguished from dissolution or divorce. To justify annulment, the marriage contract must have a defect (e.g.
which holds that no valid
marriage ever existed.
Warning: Taxpayers who obtain a decree of annulment during the year must also file amended returns Amended Return
A return filed in order to make corrections to a tax return from a previous year. It can be used to correct errors and claim a more advantageous filing.
An amended return is filed using Form 1040X. claiming an unmarried status, or single status, for all tax years affected by the annulment that are not closed by the statute of limitations A type of federal or state law that restricts the time within which legal proceedings may be brought.
Statutes of limitations, which date back to early Roman Law, are a fundamental part of European and U.S. law. .(3) The statute of limitations for filing generally does not end until three years after the filing of the original tax return.
A taxpayer is considered to be married for the entire year under the following rules: 1. The taxpayers are separated,
but have not obtained
a final decree final decree n. another name for a final judgment. In states where there are interlocutory decrees of divorce (in the hope that a further wait may lead to reconciliation), followed several months later by the actual divorce, the second order is called a final decree, of
divorce or separate maintenance
by the last day of
the tax year, or 2. The taxpayers are separated
under an interlocutory Provisional; interim; temporary; not final; that which intervenes between the beginning and the end of a lawsuit or proceeding to either decide a particular point or matter that is not the final issue of the entire controversy or prevent irreparable harm during the pendency of the
decree of divorce.(4)
Observation: The law recognizes that some people may choose to live apart, yet they may not be divorced or legally separated.
Even if a taxpayer has not yet been divorced or legally separated, if the taxpayers live apart and meet certain tests, they may be considered to be unmarried and one of them may qualify to file as head of household.
Liability for Tax on a Joint
Married taxpayers who file joint tax returns are jointly and individually liable for any tax, interest or penalty applicable to the return.(5) Therefore, one spouse may be liable for the full amount of the tax liability even if all of the income was earned by the other spouse.
Exception: Under the innocent spouse rule, an innocent spouse may be relieved of the entire tax, including interest and penalties and other amounts, if: 1. A substantial tax understatement
is attributable to "grossly erroneously er·ro·ne·ous
Containing or derived from error; mistaken: erroneous conclusions.
[Middle English, from Latin err
items" of one spouse,
including claims for deductions
and credits for which there is no
basis in fact or in law; 2. The other spouse can establish
that at the signing of the personal
tax return, he or she did not
know, nor have reason to know,
that there was a substantial understatement;
and 3. Taking into account all of the
facts of circumstances, it would
be inequitable to hold the other
spouse liable for the deficiency in
tax for such taxable year Taxable year
The 12-month period an individual uses to report income for income tax purposes. For most individuals, their tax year is the calendar year. attributable
to such substantial understatement.(6)
Generally, a substantial
understatement is one that
Observation: Congress regards the "innocent spouse" rule as an important adjunct adjunct (aj´ungkt),
n a drug or other substance that serves a supplemental purpose in therapy.
adjunct to the privilege of filing joint returns.(8)
Example 1: Lucas and Paulette Vesco filed a joint tax return for 1992. Over the past three years, the Years, The
the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109]
See : Time wife was aware that her husband traveled on his private plane for company business and also charged all of his restaurant bills and club dues to his company. Yet the wife was aware that on their personal income tax return, he never showed a salary of more than $50,000 for the tax year. The Tax Court held that the innocent spouse had reason to know of the omission omission n. 1) failure to perform an act agreed to, where there is a duty to an individual or the public to act (including omitting to take care) or is required by law. Such an omission may give rise to a lawsuit in the same way as a negligent or improper act. of income due to his lavish expenditures and extensive efforts in the pursuit of sales.(9)
Example 2: Louis and Lora Myer filed a joint tax return for the year 1991. Since Louis was an independent manufacturers' representative Manufacturers representatives (reps), also known as sales agents, are independently owned and managed sales companies that are an alternative to hiring a direct sales force. , he filed a Schedule C which underreported his gross income by $100,000 and overstated o·ver·state
tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states
To state in exaggerated terms. See Synonyms at exaggerate.
o his business expenses by $50,000. His wife, an artist who was unsophisticated in the intricacies of the Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. and who always assumed that the return was correct, signed the form at the behest be·hest
1. An authoritative command.
2. An urgent request: I called the office at the behest of my assistant. of her husband. The couple were divorced in January, 1992. In October, 1992 an audit of the 1991 tax return uncovered these transgressions and the taxpayers were assessed an additional $46,000 in taxes, interest and penalties. The wife avoided personal liability by showing that her ex-husband managed all of their financial affairs and that their modest standard of living was not noticeably higher based upon the income omitted.(10)
Observation: The benefits attributable to the innocent spouse rule will be nullified nul·li·fy
tr.v. nul·li·fied, nul·li·fy·ing, nul·li·fies
1. To make null; invalidate.
2. To counteract the force or effectiveness of. if the taxpayers hold all of their assets jointly since the government will move against all property held in the name of the taxpayer who the Internal Revenue Service claims has underpaid un·der·paid
Past tense and past participle of underpay.
not paid as much as the job deserves
underpaid adj → his or her taxes. Therefore, only those innocent spouses who hold property in their own name only will he protected from any claims for back taxes. If the understatement is not attributable to omitted income, the Internal Revenue Code imposes another test based upon the innocent spouse's adjusted gross income for the most recent tax year ending prior to the date the notice of deficiency is mailed.(11) This is referred to in the Code as the "preadjustment year."(12) In this case, the understatement must exceed a certain percentage of the spouse's adjusted gross income. A substantial tax understatement must total more than 10% of adjusted gross income if the spouses adjusted gross income is $20,000 or less for the year before the deficiency notice; or 25% if that adjusted gross income is more than $20,000.(13) Community property laws are disregarded in determining a spouse's income.(14)
Example 1: Martha Stewart <noinclude></noinclude>
Martha Stewart (born Martha Helen Kostyra on August 3, 1941) is an American business magnate, author, editor and homemaking advocate. She is also a former stockbroker and fashion model. was divorced in 1989. In 1990, her adjusted gross income was $19,000. In 1991, she received a deficiency notice applicable to 1988. The understatement of the tax would have to be greater than $1,900 ($19,000 x 10%) attributable to "grossly erroneous erroneous adj. 1) in error, wrong. 2) not according to established law, particularly in a legal decision or court ruling. items" of her former spouse in 1988 for the relief provisions to apply.
Example 2: Norman Barlow bar·low
An inexpensive, one- or two-bladed pocketknife.
[After Barlow, the family name of its makers, two brothers in Sheffield, England.] was divorced in 1989. In 1990, his adjusted gross income was $40,000. In 1991, he received a deficiency notice applicable to 1988. The understatement of the tax would have to be greater than $10,000 ($40,000 x 25%) attributable to "grossly erroneous items" of his former spouse in 1988 for the relief provisions to apply.
If the former wife is married to a new spouse at the end of the preadjustment year, the adjusted gross income must include the combined income of both the spouse and the new husband. This raises the possibility that the new combined income may be so high that the relief provisions will not apply.
Observation: "Understatement" means the deficiency in tax, plus penalties and interest accrued ac·crue
v. ac·crued, ac·cru·ing, ac·crues
1. To come to one as a gain, addition, or increment: interest accruing in my savings account.
2. to the date of notice of the deficiency, but does not include penalties and interest accruing thereafter.(15)
In a divorce proceeding involving children, the parties must agree as to which spouse will be entitled en·ti·tle
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.
2. To furnish with a right or claim to something: to claim the children's personal exemptions Personal exemption
Amount of money a taxpayer can exclude from personal income for each member of the household in calculation of a tax obligation.
See exemption. . For 1992, the exemption is $2,300. Under the Internal Revenue Code, the divorced parent having custody of the child for the greater part of the year is entitled to the $2,300 dependency exemption for the child even if the noncustodial non·cus·to·di·al
1. Not having custody of one's children after a divorce or separation: a noncustodial parent.
2. parent provides more support payments than the parent having custody.
Observation 1: In many situations, the custodial parent will be entitled to the dependency exemption even if the noncustodial parent provides 100% of the child's support. However, the noncustodial parent is permitted to take the exemption if the custodial parent signs a written declaration releasing the claim to the dependency exemption for one or more years permanently.(16)
Observation 2: From a tactical viewpoint, the custodial parent might consider permitting a divorced spouse who is in a higher tax bracket Tax Bracket
The rate at which an individual is taxed due to a particular income level.
Each income class is taxed at a different level. Generally, the more you make the more you are taxed. and is therefore required to pay child support to take the exemption in return for larger child support payments. The theory is that the dependency exemption is worth more to the individual in a higher federal income tax bracket Noun 1. income tax bracket - a category of taxpayers based on the amount of their income
income bracket, tax bracket
bracket - a category falling within certain defined limits . However, the effectiveness of this method has been reduced with the introduction of the two-tier tax bracket structure.
Observation 3: The custodial parent who elects to release the exemption to the noncustodial parent should use Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parent or a similar statement. The exemption may be released for a single year, for a number of specified years, for example alternate years, or for all future years, as specified in the declaration.
Alimony-Instruments Executed Before 1985
Many taxpayers will continue to make 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 payments pursuant to agreements made prior to 1985. In order for the payor to receive alimony treatment, the following requirements must be adhered to: 1. The payments must be made pursuant to either:
a) decree of divorce, separate maintenance decree or
a decree of support; or
b) a written separation agreement; 2. The payments must be either:
a) for a period of more than 10 years or be subject to
a contingency such as the death of either spouse,
n. 1. A second or repeated marriage.
Noun 1. remarriage - the act of marrying again of the recipient; or
b) a change in the economic status of either spouse; 3. The payments must be in "discharge of a legal obligation
arising from the marital of family obligations."(17)
Observation 1: A taxpayer does not recognize income from the receipt of child support payments made by a former spouse. Under agreements made before 1985, if the decree or agreement does not specifically provide for child support, then the entire payment shall be treated as alimony.(18)
Observation 2: Under the Internal Revenue Code, any amount fixed by an instrument as support for children of the payor is considered not to be alimony or separate maintenance.(19) Therefore these payments cannot be deducted de·duct
v. de·duct·ed, de·duct·ing, de·ducts
1. To take away (a quantity) from another; subtract.
2. To derive by deduction; deduce.
v.intr. by the payor nor are they to be included in the income of the payee The person who is to receive the stated amount of money on a check, bill, or note.
payee n. the one named on a check or promissory note to receive payment.
PAYEE. The person in whose favor a bill of exchange is made payable. recipient.
Example: Pursuant to a 1984 decree of divorce entered into between Allen Vicks and his former spouse Margo, the husband agreed to make alimony payments of $700 per month. It was also agreed that Margo was to have custody of their daughter Donna. In addition, the husband agreed that if their daughter reaches the age of 21, marries or dies, whichever occurs first, the payments will be reduced to $400 per month. Since the agreement does not specifically provide that any of the payments are to be for child support, then the entire $700 payment will be treated as alimony. The payments would then be deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). by the husband and taxable to the wife.
Observation: In 1984, the Code amended the results of the prior example but only as to post-1984 agreements. Under the revision, if the payment is to be reduced upon the happening of a contingency relating to relating to relate prep → concernant
relating to relate prep → bezüglich +gen, mit Bezug auf +acc the child, then the amount of the future reduction will be characterized as child support payments.(20)
Example: If the agreement presented in the prior problem was executed in 1985, then $300 ($700 less $400) would be deemed child support, and hence, non-deductible to the payor and non-excludible to the recipient.
Alimony-Instruments Executed After 1984
Certain payments, such as alimony or separate maintenance, are deductible by the payor and included in the recipient's income. Effective for decrees and agreements executed after 1984, to qualify for such tax treatment, the following conditions must exist:(21) 1. The payment must be made in cash. 2. The payment must be made to or on behalf of the
recipient. 3. The parties do not designate des·ig·nate
tr.v. des·ig·nat·ed, des·ig·nat·ing, des·ig·nates
1. To indicate or specify; point out.
2. To give a name or title to; characterize.
3. that the payment is not
to be alimony which will be excluded from the
recipient s gross income. 4. The parties cannot be members of the same household
when the payments are made. 5. All payments are to cease on the death of the recipient.
Example: Herbert Collins For other persons of the same name, see Collins (surname).
Herbert Collins (born 1885, died 1975) was a British architect. He designed many of the suburban developments in the city of Southampton in the 1920s and 1930s, and co-founded the Swaythling Housing Society on 26th , as part of a divorce settlement, agreed to pay his former wife Lucy $10,000 each year for 10 years, such payments to cease on the death of the former spouse. In addition, under the settlement, Herbert also agreed to pay Lucy or her estate $20,000 in cash each year for 10 years. Since the $20,000 annual payments will not end at the death of the former spouse, these payments will not qualify as deductible alimony or separate maintenance payments. Note however, that the separate $10,000 annual payments will qualify as alimony or separate maintenance payments. 6. The payments cannot be treated as child support. 7. The minimum term rule (or excess front-loading
rules discussed below) cannot be violated vi·o·late
tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates
1. To break or disregard (a law or promise, for example).
2. To assault (a person) sexually.
Excess Front-loading Rules
In order to insure that the payments deducted as alimony are not disguised property settlements, a three-year recapture recapture n. in income tax, the requirement that the taxpayer pay the amount of tax savings from past years due to accelerated depreciation or deferred capital gains upon sale of property. (See: income tax)
RECAPTURE, war. rule requires the recapture of excess amounts that have been treated as alimony either during the calendar year in which the payments were began or in the next succeeding calendar year. "Excess alimony" is to be recaptured in the payor spouse's taxable year beginning in the third post-separation year by requiring the payor to include the excess in his or her income. The amount of the excess Payments in the first and second post-separation years is determined by a statutory formula.
For the first recapture year, the excess payment amount is the excess (if any) of the total alimony paid in the first post-separation year over the sum of $15,000 and the average of the alimony paid in the second post-separation year, minus the excess payments for the year and the amount of alimony paid in the third post-separation year.
Example 1: In 1989, pursuant to his divorce decree, Henry Grant agreed to pay his ex-wife Janet $60,000. He makes no payments for 1990 and 1991. As a result, $45,000 will be recaptured in 1991 and Henry will have to report an additional $45,000 on his personal income tax return while Janet will be entitled to a reduction of $45,000.
How to Report Recaptured Alimony
Taxpayers subject to recaptured income must cross out the line stating "Alimony Received" on the front page of their Form 1040 and write "recapture." The line must also indicate the last name and social security number of the former spouse.
Example 2: Nick Beal Nicholas David Beal (born 2 December 1970 in Howden) is a rugby union player who played at full back for Northampton Saints, England and the Lions. He attended the Royal Grammar School, High Wycombe. and his wife Trudy were divorced on March 1, 1991. Under the terms of the divorce decree, Trudy agreed to pay Nick the following amounts of alimony:
1991 (1st post-separation year) $25,000
1992 (2nd post-separation year) 4,000 1993 (3rd post-separation year) 4,000
Since the payments in the second year do not exceed the payments in the third year PLUS $15,000, there is no amount to be recaptured for that year. However, because the payments in the first year exceed the average of the payments in the second and third years PLUS $15,000, part of the first year payments must be recaptured. The recapture will not occur, however, until the third year. The amount of the recapture will be $6,000 calculated as follows:
Alimony paid in 1991 $25,000
Average alimony payments made in second and third year
[($4,000 + $4,000)/21] $4,000 PLUS: $15,000 Floor 15,000 19,000 First year payment recaptured in 1993 $6,000
Trudy will show the $6,000 as income on her 1993 Form 1040 while her husband will deduct de·duct
v. de·duct·ed, de·duct·ing, de·ducts
1. To take away (a quantity) from another; subtract.
2. To derive by deduction; deduce.
v.intr. the same amount on his own personal tax return, whether or not he itemizes his deductions.
Example 3: Kent Raymond and his wife Alice were divorced on April 1, 1991. Under the terms of the divorce decree, Alice agreed to pay Kent the following amounts of alimony:
Year Amount 1991 (1st post-separation year) $60,000 1992 (2nd post-separation year) 40,000 1993 (3rd post-separation year) 20,000
Alice as payor will calculate the amount to be recaptured as follows:
Year 2 Calculation
Alimony paid in second year $40,000 Alimony paid in the third year $20,000 PLUS: $15,000 Floor 15,000 $35,000 Second year payment recaptured in 1993 $5,000
The amount allowed as alimony for the second year will be $35,000 ($40,000 - $5,000). This amount will be used for calculating the recapture for the first post-separation year.
Year 1 Calculation
Alimony paid in 1991 $60,000
Average alimony payments made in second and third year
[($35,000 + $20,000)/21 $27,500 PLUS: $15,000 Floor 15,000 42,500 First year payment recaptured in 1993 $17,500
The wife will show $22,500 ($5,000 + $17,500)as income on her personal income tax return for 1993. The husband will deduct the same amount on his 1993 personal tax return.
A taxpayer may prepare a worksheet for the recapture of allmony as follows:
Worksheet For Recapture of Alimony
(For instruments executed after 1986)
NOTE: Do not enter less than zero on any line.
1. Alimony paid in 2nd year 40,000
2. Alimony paid in
3rd third year 20,000 3. Floor 15,000 4. Add lines 2 and 3 35,000 5. Subtract line 4 from line 1 5,000 6. Alimony paid in 1st year 60,000
7. Adjusted alimony paid in
2nd year (line I less line 5) 35,000
8. Alimony paid in 3rd year 20,000 9. Add lines 7 and 8 55,000 10. Divide line 9 by 2 27,500 11. Floor 15,000 12. Add lines 10 and 11 42,500 13. Subtract line 12 from line 6 17,500
14. Recaptured alimony
Add lines 5 and 13 22,500
Minimum Term Rule
The minimum term rule applies only to payments made under instruments executed in 1985 or 1986. Under this rule, alimony payments in excess of $10,000 in any year were deductible only if the alimony payments were required to be made for at least six consecutive years, beginning with the calendar year a payment was first made. In addition, if the payments were deductible for any year but decreased by more than $10,000 from that year in a subsequent year during the 6-year period, the earlier year's payments in excess of the later year's payments plus $10,000 would be recaptured and deducted by the payee in the later year.
Example 1: Pursuant to a divorce decree, John Parsons John Parsons could refer to:
Example 2: Pursuant to a divorce decree, Paul Flack was required to make alimony payments to his former wife of $20,000 in each of the 5 calendar years 1988 through 1992 and a $1 payment in 1993. Since the 6 year minimum term rule has been met, the entire $20,000 annual payment would be treated as alimony and therefore fully deductible in each of the calendar years 1988 through 1992.
Transfers Between Spouses and Former
The transfer of property to a person's spouse while they are married or as a result of a dissolution of a marriage does not constitute a taxable event Taxable event
An event or transaction that has a tax consequence, such as the sale of stock holding that is subject to capital gains taxes. . This is true even if the transfer is made in exchange for the release of marital rights marital rights n. an old-fashioned expression for the rights of a husband (not rights of a wife) to sexual relations with his wife and to control her operation of the household. (See: consortium, loss of consortium) under the applicable state law or for other consideration. This provision applies to any transfer made to one's spouse during the marriage or within one year after the marriage is dissolved dis·solve
v. dis·solved, dis·solv·ing, dis·solves
1. To cause to pass into solution: dissolve salt in water.
2. . It also applies to later transfers to a former spouse if the transfers are made incident to the divorce such as pursuant to a provision of a divorce decree.(23)
Example: Tom and Wilma were divorced in 1991. Under the terms of their divorce agreement, Tom received marketable securities Marketable Securities
Very liquid securities that can be converted into cash quickly at a reasonable price.
Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has with a basis of $40,000 and a fair market value of $30,000. Wilma received a house with a basis of $100,000, a fair market value of $90,000 and subject to a mortgage of $70,000. No gain or loss is recognized by either party regardless of who owned the property before the transfer. The husband will have a basis of $40,000 for the securities while the house, in the hands of Wilma, will have a basis of $100,000.
Observation: The legal expenses incurred in obtaining a divorce may or not be deductible. Those expenses directly related to obtaining tax advice regarding the consequences of a divorce are fully deductible. Other legal fees, such as those involved in a defense of a divorce suit, are nondeductible non·de·duct·i·ble
Not deductible, especially for income-tax purposes.
Adj. 1. nondeductible - not allowable as a deduction
deductible - acceptable as a deduction (especially as a tax deduction) even though the results reflect on the taxpayer's production of income and might affect his or her business reputation.(24)
Individual Retirement Accounts
A husband and wife who obtain a final decree of divorce or separate maintenance by the end of the tax year and who make contributions to their former spouse's IRA Ira, in the Bible
Ira (ī`rə), in the Bible.
1 Chief officer of David.
3 Two of David's guard.
IRA. cannot deduct those contributions applicable to the exspouse. Only those contributions made directly into an individual's own individual account may be deducted.
A trust, the income of which is taxable to the grantor An individual who conveys or transfers ownership of property.
In real property law, an individual who sells land is known as the grantor.
grantor n. husband, will be taxable to the wife if the income is payable to her under a written separation or divorce agreement.(25)
Any income that must be used to support the grantor's children shall continue to be taxed to the grant or husband.
Federal Consequences of Marital Dissolution
Payments and Property Transfers
Estate Tax Consequences
The accountant who is involved in the tax and accounting aspects of the termination of a marriage must be cognizant cog·ni·zant
Fully informed; conscious. See Synonyms at aware.
Adj. 1. of the potential tax liabilities that may result from the legal obligations created under the separation or divorce instrument. A determination must be made as to: 1. Whether the obligations under a divorce or separation
agreement that arise and continue after the death
of the transferor are deductible in computing computing - computer the
decedent's taxable estate Taxable Estate
The total value of a deceased person's assets that are subject to taxation - minus liabilities and minus the prescribed tax-deductible portion of assets left behind by the deceased. ; and 2. Whether the payments constitute a charge against
the decedent's estate. If the payments constitute a
charge against the estate, then they may be dedlictible
from the decedent's estate as either:
a) A claim against the decedent's estate;(26) or
b) Indebtedness with respect to property included
in the decedent's gross estate.
Gift Tax Consequences
As a general rule, the transfer of property for "less than adequate and full consideration in money or money's worth" is a gift to the extent the value of the property transferred exceeds the value of the consideration.(28) However, the transfer of property made under the terms of a written agreement between spouses in settlement of their marital or property rights incident to adivorce are deemed to be for an adequate and full consideration in money or money's worth and therefore free of tax.(29) They are also exempt from the gift tax whether or not the agreement is approved by the divorce decree, if the spouse obtains a final divorce decree within two years after entering into the agreement or they enter into an agreement within one year after the divorce.(30)
With a steady rise in the divorce rates, it is imperative that the practicing accountant have a basic grasp of the fundamental problems created by a divorce. While the above discussion is not all inclusive, it does present the basics issues faced by any couple contemplating a dissolution of their marriage.
(1) 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] 7703. (2) Rev. Rul. 76-255, 1976-2 CB 40. (3) Rev. Rul. 76-255, 1976-2 CB 40. (4) Comm See comms. . v. Eccles, 208 F. 2d 796, 45 AFTR AFTR American Federal Tax Reports (Prentice-Hall)
AFTR Americans For Tax Reform
AFTR Air Force Training Ribbon
AFTR Air Force Training Record
AFTR atrophy, fasciculation, tremor, rigidity
AFTR Atomic Frequency Time Reference 34 (1953); Rev. Rul. 57-368, 1957-2 CB 896. (5) IRC [section] 6013 (d) (3); Reg. [section] 1.6013-4 (b). (6) IRC [section] 6013 (e)(1). (7) IRC [section] 6013 (e) (3). (8) Sonneborn v. IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. , 57 TC 373, pgs. 381-383 (1971). (9) Vesco v. IRS, Para. 79,374 P-H Memo. TC (1979). (10) Mysse v. IRS, 57 TC 680 (1972). (11) IRC [section] 6013 (e) (4). (12) IRC [section] 6013 (e) (4) (C). (13) IRC [section] 6013 (e) (4) (A), (B). (14) IRC [section] 6013 (e) (5). (15) Farmer v. United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , 794 F.2d 1163 (6th Cir. 1986). (16) IRC [section] 152 (e) (2) (A). (17) IRC [section 71 (a) and (b) prior to amendment by [section] 422 of the Deficit Reduction Act of 1984. (18) Comm. v. Lester, 61-1 USTC USTC University of Science and Technology of China
USTC United States Tax Cases (Commerce Clearing House)
USTC United States Transportation Command (see USTRANSCOM) Para.9463, 7 AFTR 2d 1445, 81 S. Ct. 1343 (1961). (19) IRC [section] 71 (c). (20) IRC [section] 71 (c)(2). Note that pre-1985 agreements can be amended so that the Code revision will apply [[section] 422 (e) of the Deficit Reduction Act of 1984]. (21) IRC [section] 71; Temp. Reg. [section] 1.71-1T. (22) IRC [section] 71 (f). (23) IRC [section] 1041 (a) add (c). (24) U.S. v. Gilmore, 63-1 USTC Para. 9285, 3721 J. S. 39 (1963). (25) IRC [section] 682. (26) IRC [section] 2053 (a) (3). (27) IRC [section] 2053 (a) (4). (28) Merrill v. Fahs, 324 U.S. 308 (1945). (29) IRC [section] 25 16. (30) IRC [section] 2043 (b) (2).
Antony Arcadi, MA, 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. , is on the faculty at Brooklyn College Brooklyn College: see New York, City University of. , CUNY CUNY City University of New York , in New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . He has published articles in professional journals on the subjects of taxation and accounting