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Discussion
The Federal tax consequences to both the paying spouse and
receiving spouse of a payment made incident to divorce depend
upon the characterization of such payment. Property settlements,
or equitable divisions of marital property, are generally neither
deductible from the income of the paying spouse nor includable in
the income of the receiving spouse. Sec. 1041. On the other
hand, payments made or received as alimony are generally
deductible by the paying spouse under section 215(a) and
includable in gross income by the receiving spouse under sections
61(a)(8) and 71.
Section 215(b) provides that the paying spouse may deduct a
payment as alimony if the payment is “includible in the gross
income of the recipient under section 71”. Section 71(b)(1)
defines an alimony payment as any cash payment meeting each of
the following four criteria:
(A) such payment is received by (or on behalf of)
a spouse under a divorce or separation instrument,
(B) the divorce or separation instrument does not
designate such payment as a payment which is not
includible in gross income under this section and not
allowable as a deduction under section 215,
(C) in the case of an individual legally
separated from his spouse under a decree of divorce or
of separate maintenance, the payee spouse and the payor
spouse are not members of the same household at the
time such payment is made, and
(D) there is no liability to make any such
payment for any period after the death of the payee
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Last modified: May 25, 2011