THE MISCHIEF OF “FAMILY SUPPORT”
April 4, 2013 § 3 Comments
I’ve spoken here before about the mischief that can arise when one uses the ambiguous term “family support” instead of terms of art such as “child support,” “alimony,” and “property division” that are familiar to our courts. As I said in a previous post, the repercussions can be quite unexpected and unpleasant for your client.
In a decision handed down March 11, 2013, the US Tax Court in the case of DeLong v. Commissioner of Internal Revenue, ruled that the term “family support” creates an alimony obligation, and not a child support obligation.
You can read the decision for yourself, but it essentially turns on the point that since the obligation is not specifically denominated as child support the IRS will not consider it such.
This case arises out of a California divorce judgment. Note that the opinion states that the tax court will look to state law for how the state would treat the obligation. If this were a Mississippi case, the tax court would, to the best of my knowledge, find no helpful authority because the term “family support” is unknown under our law.
There are some serious side-effects from a case such as this. Child support is not deductible by the payer, and it is not income to the payee. Alimony is, however, deductible by the payer, and it most definitely is income to the payee. So, in this case, Mr. Delong got to deduct the payments under the divorce judgment, and the former Mrs. D. gets a bill for income taxes on the payments. If you had negotiated the settlement for Mrs. Delong and that is what she expected as an outcome, then you’re in good shape. If, on the other hand, she was not expecting a tax bill, you’d better look out.
And if the judge, in a comatose moment, injects that kind of language into a judgment, protect your client by filing a timely MRCP 59 motion to get the judge to correct the ambiguity.
In Mississippi, payments are either alimony, or child support, or property division. Denominate them as such, allocating the specific amounts under each. Never use combined language like “Husband shall pay to wife the sum of $2,500 each month as alimony and child support.” And never use ambiguous, non-legal language like “family support” when there are perfectly suitable, meaningful terms like “child support,” “alimony” and “property division” that do the job quite well.
Thanks to Justin Cobb, Esq.