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Analysis 1: By mentioning their heirs in the divorce agreements, the Browns have not
disqualified their payments from being treated as alimony. This issue arises from section 71 (b)
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(1) (D) which reads there is no liability to make any such payment for any period after the
death of the payee spouse and there is no liability to make any payment (in cash or property) as
a substitute for such payments after the death of the payee spouse. This section specifically
calls for the termination of payments to the recipient upon either the death of the payee or the
payer. If this condition is not met, no part of the payment shall be treated as alimony, as
therefore not qualify as a deduction. The language of the agreement is vague as to the
termination of the payments. Upon examining Florida president set forth in Hoover v.
Commissioner, found that alimony terminates upon the death of either of the parties or
upon the remarriage of the wife. This is the key factor in determining the treatment of the
payments. The court found that the language relating to the couples heirs was not so broad as
to constitute a requirement that the petitioner continue to make alimony payments to the
estate after her death, therefore the requirement under section 71 (b) (1) (D) are satisfied
because there is no language requireing the payer to make any payments after the death of the
payee.
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Florian Aarts
ACTG 421 Summer 14
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Analysis 2:
With respect to treatment of alimony, the recipient of alimony must include the amounts
received in gross income. The payor of alimony may deduct paid amounts for adjusted gross
income. Payments must be pursuant to a divorce settlement, separation, or a written
agreement between spouses. Property settlements and child support payments are not
deductible. (Brandy, pg. 3-19). All these conditions are met, therefore the full amount of the
alimony payment is. No part of the payment is made as a property settlement or as child
support, therefore the entire amount is deductible from Adjusted Gross Income by Aubry in the
year in which the alimony payments were made.
Issue and Conclusion 3:
When can Aubry deduct the $12,000?
Aubry can deduct the full $12,000 for the tax year in which the alimony was paid to
Melissa.
Analysis 3: A requirement of alimony payments is that spouses live in separate households.
Provided that Aubry and Melissa live in separate households, the alimony is deductible in the
year the payments are made. As long as all other conditions are met to qualify the payment as
alimony, the entire $12,000 may be deducted from Adjusted Gross Income by Aubry in the year
in which the alimony payments were made.
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