Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

COMMUNITY-PROPERTY SPOUSE GETS ALIMONY-LIKE DEDUCTION FOR NONALIMONY PAYMENTS TO EX

March 31, 2005

John Dunkin wasn't ready to retire when he became eligible for his pension from the City of Los Angeles. His ex-wife, though, was ready to collect her $2,072 monthly share of his pension, which she was entitled to under their divorce decree under California's community property rules.

Even though he wasn't collecting the pension yet, the California courts ordered him to pay the $2,072 monthly as if he were. The Tax Court today ruled that he could exclude the amount he was paying his spouse from his taxable income.

NORMALLY ONLY ALIMONY GETS EXCLUDED

The tax law allows spouses to deduct alimony they pay under a divorce decree. The law spells out what alimony is (generally specified payments for a period not continuing after the death of the recipient, and not child support), and it is unusual to see any item not strictly fitting that definition allowed as a deduction (in fact, a deduction for ex-spouse payments is disallowed in another Tax Court decision issued today).

This decision doesn't say how the former Mrs. Dunkin should be taxed, but presumably she would have to pick up the payment as income.

April 15 is the date the statute of limitations runs for 2001 returns. A lot of working California divorcees might be filing some quickie refund claims based on this case. It might apply the same way in other community property states.

Cite: Dunkin v. Commissioner, 124 T.C. No. 10.

      Bookmark: del.icio.us • Digg • reddit