inthetrailer
Junior Member
Hello,
I got divorced last year and paid alimony since the divorce, which I am claiming. No questions about that. However, as part of the divorce agreement and court ordered settlement, I had to pay my ex a $20,000 payment in exchange for her portion of the equity in the house (which I kept). HOWEVER, this payment also meets all the criteria in IRS Pub 504 for alimony! (page 14) Because...
Therefore, it would seem to me that I can include it under my alimony payment total.
Here's a link to Pub 504: http://www.irs.gov/pub/irs-pdf/p504.pdf
Playing devils advocate, a friend of mine agrees with me on the above, but says the Property Settlement section on page 18 applies and thus nullifies it as alimony. Quick text from that section reads "Generally, no gain or loss is recognized on the transfer of property from you to your spouse/former spouse if incident to your divorce. This rule applies even if the transfer was in exchange for cash, release of marital rights, assumption of liability" etc. I do not dispute this payment was in exchange for cash and release of marital rights at all. My understanding of the "gain or loss" reference in this section is with regards to property value and recording gain or loss of property itself on your taxes, NOT whether it fits the definition of alimony (and thus, gain or loss of taxable income, although now that I write this out I don't know how you can show a loss on taxable income so it must be referring to property only). Also, it doesn't state that if it meets this criteria it cannot count as alimony, either.
So what do you think? Am I correct in thinking the payment in exchange for her equity in the property ALSO qualifies as alimony? It sure seems like it to me... please let me know your thoughts!
TIA!
I got divorced last year and paid alimony since the divorce, which I am claiming. No questions about that. However, as part of the divorce agreement and court ordered settlement, I had to pay my ex a $20,000 payment in exchange for her portion of the equity in the house (which I kept). HOWEVER, this payment also meets all the criteria in IRS Pub 504 for alimony! (page 14) Because...
- It was in cash (a check)
- It was not designated as "not alimony"
- We were not members of the same household
- There is no after death payment liability
- It was not treated as child support
Therefore, it would seem to me that I can include it under my alimony payment total.
Here's a link to Pub 504: http://www.irs.gov/pub/irs-pdf/p504.pdf
Playing devils advocate, a friend of mine agrees with me on the above, but says the Property Settlement section on page 18 applies and thus nullifies it as alimony. Quick text from that section reads "Generally, no gain or loss is recognized on the transfer of property from you to your spouse/former spouse if incident to your divorce. This rule applies even if the transfer was in exchange for cash, release of marital rights, assumption of liability" etc. I do not dispute this payment was in exchange for cash and release of marital rights at all. My understanding of the "gain or loss" reference in this section is with regards to property value and recording gain or loss of property itself on your taxes, NOT whether it fits the definition of alimony (and thus, gain or loss of taxable income, although now that I write this out I don't know how you can show a loss on taxable income so it must be referring to property only). Also, it doesn't state that if it meets this criteria it cannot count as alimony, either.
So what do you think? Am I correct in thinking the payment in exchange for her equity in the property ALSO qualifies as alimony? It sure seems like it to me... please let me know your thoughts!
TIA!