Items Not Considered Alimony
In a couple of recent Tax court cases the court ruled on a few items that cannot be considered alimony.
Attorney Fees – The court held in Nicholas v. Comm, TCS 2011-91, that attorney fees incident to a divorce were not alimony. These were attorney fees and costs paid on behalf of a husband’s ex-wife. The court reasoned that because the payments made by the husband were not made contingent upon any factor of event, they did not constitute deductible alimony.
Contingency Related to a Child – In Knoedler v. Comm, TCS 2011-18, the court held that an individual cannot deduct as alimony the payments he made to his former wife under a postnuptial agreement where the agreement contained a contingency pertaining to his child. The court reasoned here that the reduction of payments after the child’s graduation represented a contingency related to a child and, the payments were nondeductible child support.
Also, remember that if a divorce or separation decree provides for both the payment of alimony and child support and the spouse that is to pay the amount does not make payment in full, non-deductible child support will be deemed to be paid first pursuant to IRC Section 71(c)(3).