With Pub. L. 98-369, Congress intended to end controversies over the deduction of alimony by enacting clear straightforward rules.  Thus, beginning in 1985 under Section 71 alimony, deductible to the paying spouse and includible in income by the recipient, is defined to include payments that meet all of the following:

  • Paid in cash
  • Received under a divorce or separation agreement which may include
    • Divorce decree, decree of separate maintenance or written instrument incident to such a decree.
    • Written separation agreement which can be formal or informal
    • A decree not described above providing for support payments to the other spouse
  • Not designated in the decree or written agreement as non-taxable/ non-deductible.
  • Not paid and received by parties who are divorced or legally separated and living in the same household or who file a joint return for the year.
  • Not designated as payment for child support or keyed to reduce upon happening of contingencies involving a child such as age, laving school, marrying, etc.
  • Not front loaded

In Kevin P. Larievy and Amber Y. Larievy v Commissioner, T.C. Memo 2012-247 (August 28, 2012), the petitioner and his second wife deducted alimony in the amount of $19,200 on their joint return for 2008, having been married in December 2008.

Kevin and his former wife divorced also in December 2008 after having been separated since 2004.  When they separated they had orally agreed that Kevin would pay $2,608 per month to his former spouse for her living expenses and those of their children.  This amount was not broken out between the spousal support and the child support.

 In May of 2008 they finally filed for divorce in California, representing themselves.  On September 2, 2008 they filed papers with the Superior Court in support of their uncontested petition, stating:

 During March of 2004, I Kevin Larievy agreed to pay Renee Larievy the amount of $2,605 as support (for spouse and children) for four years.  This would give time for adjustment, job search and or employment training.  At the time of our daughter’s… 18th birthday (May 23, 2008) this amount f $23,605 per month would end. A new and lesser amount would then be agreed upon.  Up and to, including the month of September, 2008, the amount of $2,605 ahs continued until …( the divorce proceeding is settled).

The final judgment entered by the court awarded to the former spouse alimony in the amount of $1,400 per month from December 1, 2008.

The petitioners, not knowledgeable, in tax matters, had given all of the court documents and related information about the separation agreement to a professional, experienced tax return preparer (accountant for the company where the wife worked) who advised them to claim an alimony deduction in their 2008 return for $19,200, all of the 2008 payments made to the former spouse.  The IRS, upon audit, disallowed $17,800 of alimony, the only adjustment to the return.  Thus, only $1,400 was allowed by IRS which represented the December 2008 court ordered payment.

The court upheld the Commissioner’s disallowance of all but the $1,400 paid pursuant to the divorce decree but decided that the petitioners were not liable for the accuracy related penalty under IRC Section 6662(a).  From 2004 to September 2008, when the parties filed a memorandum with the court, there was no written agreement whatsoever.  The memorandum filed with the court was found to merely state a historical narrative of the parties’ four-year separation and agreement to make monthly payments.  It did not indicate what part of the $2,605 payment was for child support and what part was for alimony, although it specifically provided that part of the payment was for child support.     

 The court’s final judgment was the first written instrument that specifically stated an amount of alimony and met the other conditions of Section 71 for deductibility.   Thus, the petitioners were entitled under Section 71 to deduct only the $1,400 payment made under the final judgment. The petitioners were held not liable for the accuracy related penalty because they were found to have acted in good faith and to have reasonably relied on competent professional advice after having provided to the preparer all pertinent facts and documents.  These circumstances establish “reasonable cause” for the understatement as provided under IRC Section 6664(c) (1).


  • Put it in writing.  During separation even an informal letter signed by both spouses will suffice to clinch the deduction if the other conditions are met.
  • Undifferentiated support stated to be spousal support and not stated as for child support does not fix the amount of child support and may be deductible, if the other conditions of Section 71 are satisfied.  In this case, the parties written memorandum filed with the court was after the fact and specifically referred to child support but did not designated what part of the total payment was child support. One potential problem with unallocated support, sometimes called “family support,” is that state law may require that the payment continue, for the benefit of minor children, beyond the death of the recipient spouse, thus, violating one of the Section 71 conditions for deductibility.  The payments in this case were also set to reduce upon a child reaching majority.  Having flunked the written agreement test, the court did not need to address other aspects of the arrangement that failed to satisfy the conditions required by Section 71.
  • A court may adopt a previously entered written agreement but cannot by some magic change an oral agreement retroactively into a written agreement.   

 © 2012 by Robert S. Steinberg, Esquire
All rights reserved

This entry was posted in ALIMONY, DIVORCE, TAX and tagged , , , , , . Bookmark the permalink.


  1. Becky Stevens says:

    Another lesson in this case is that it is important to find a tax professional knowledgeable about taxation with regard to your specific issues. The taxpayers engaged the accountant who prepared payroll tax returns for the company the wife worked for. The knowledge necessary for payroll tax accounting is not the same as the knowledge necessary for taxation when there is a divorce in a community property state, such as California, where the taxpayers reside. The ex-wife did not qualify for relief under the abandoned spouse provisions under I.R.C. Section 66 because there were transfers of community income, she was receiving regular monthly payments from her estranged spouse. Therefore, 100% of his income until the date of the divorce was community income, 50% taxable to each. She was also entitled to report 50% of the income tax withheld. The lack of a separation agreement is equally harmful to her. In some community property states, the community is dissolved upon entering a written separation agreement, and community income is no longer an issue. She would be taxable on the alimony, which may or may not be better than being taxable on 50% of the community income. It is likely that she did not report any of his income, which may constitute a substantial understatement and open her up to a six year statute of limitations.

    The Larievy’s represented themselves before the Tax Court, and they asserted that the transfer payments were alimony. Had they engaged the services of a CPA or an attorney, the question of community income might have been raised, and I think they would have prevailed.

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