Take the Work Out of Divorce Tax Planning
Whether you are structuring agreements, advising clients, negotiating with adversaries, or presenting to the court, it is important to have a clear understanding of the tax consequences. However, lack of funds or time to hire a tax expert sometimes leaves you wandering alone through this complicated area. Now there’s a roadmap.
This plain English manual walks you step-by-step through the most commonly arising trouble spots in property distribution, support, and more. This answer book is intelligently organized and indexed, well-supported with citations, and most important, loaded with practical advice. Divorce Taxation will help you sidestep problems in these areas:
- Property aspects of dissolution
- Alimony and separate maintenance payments
- Temporary support payments
- Child support
- The dependency exemption and child tax credit
- Medical expenses for dependents
- Deductibility of attorney’s fees
- The kiddie tax
- Joint returns
- Innocent spouse election and equitable relief
- Retirement benefits, QDROs and IRAs
- Stock options
Complicated rules can slow down your progress as you work your way through the taxation pitfalls and opportunities that abound in divorces. Divorce Taxation quickly guides you through trouble spots and alerts you to potential tax savings in property distribution, support, and more. It offers on-target explanations, examples, specimen clauses, forms, checklists, tables, and other practical planning tools—all designed to reduce the work in divorce tax planning. This problem-solving book is loaded with how-to gems like:
- How to structure make-up alimony payments to side-step income recapture. Section 126.96.36.199
- How to transfer an IRA tax-free. Section 14.8
- How to avoid non-deductible child support treatment. Section 3.8.2
- How to qualify alimony as taxable and deductible. Section 3.5
- How to bypass tax on interest payments. Section 2.4.2
- How to enforce the record requirements of property transfers. Section 2.1.4
- How to shift the dependency exemption and the child tax credit to the non-custodial parent. Section 5.1.5
- How to deduct a portion of the attorney’s fees. Section 7.5
The book includes appendices with proposed orders and forms, clauses to achieve Lester results, and the Temporary Regulations which are still in force.
REVISION 19 HIGHLIGHTS
This new edition of Divorce Taxation, by authors Brian C. Vertz and Mitchell E. Benson (with Aliah Molczan), covers tax- and divorce-related financial considerations critical to the practice of family law, including considerations arising out of the Coronavirus Aid Relief and Security Act (“CARES Act”), its several companion Acts and numerous related Executive Orders and IRS Rulings. The topics addressed include:
- CARES Act tax changes to carrybacks and carryovers of losses and deductions and how these are to be addressed in property settlements and cash flow analysis [Chapters 2, 6 and 9].
- The Paycheck Protection Program (“PPP”) loan requirements, forgiveness, accounting, and taxation. Plus, how to identify and deal with PPP loan proceeds in business valuation and when calculating net income for support. [Chapter 6].
- Expanded unemployment, stimulus payments, and other economic incentives (including depreciation enhancements that may necessitate filing amended returns), which provided short- and long-term relief in response to COVID-19 [Chapters 5 and 9].
- Internal Revenue Service extensions and provisions to relieve the tax payment and filing burdens during COVID-19 and how these will impact tax years beyond 2020. [Chapter 9].
- Families First Coronavirus Response Act (FFCRA) family leave and other tax incentives [Chapter 5].
- The SECURE Act updates include a discussion of stretch IRA changes to consider (e.g., new age for required minimum distribution) when advising your clients re dividing assets [Chapters 13 and 15.]
- Tax Cuts & Jobs Act of 2017 (TCJA) alimony alternatives and how practitioners have dealt in the ensuing years since enactment with the repeal of the alimony deduction. Suggestions for replacement streams of income to create similar economic outcomes [Chapter 3].
- Qualified Opportunity Zones (QOZs) and other new deferred tax provisions that create significant tax obligations in the future in exchange for current tax relief [Chapter 2].
- Insurance and grantor trusts and the issues these present when evaluating income and income taxes and how to undo (if you can) these trusts when dividing assets. [Chapter 17].
- Updated tax forms and expanded cross-referencing, given the extensive rework of many of the personal and business tax returns, including the now multi-page (and growing) K1 schedule for passthrough business information [Appendix 31].
- The highlights of the Consolidated Appropriations Act of 2021, including the Coronavirus Response and Relief Supplemental Appropriations Act and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which authorized a second round of economic stimulus payments, federal pandemic unemployment benefits, PPP2 loans, the tax treatment of wages paid with forgiven PPP loans, business meal deductions, and more.