May 27, 2011 § 5 Comments
Proving your case by proving certain factors is a fact of legal life in Mississippi. I’ve referred to it as trial by checklist. If you’re not putting on proof of the factors when they apply in your case, you are wasting your and the court’s time, as well as your client’s money, and you are committing malpractice to boot.
Many lawyers have told me that they print out these checklists and use them at trial. I encourage you to copy these checklists and use them in your trial notebooks. And while you’re at it, you’re free to copy any post for your own personal use, but not for commercial use. Lawyers have told me that they are building notebooks tabbed with various subjects and inserting copies of my posts (along with other useful material, I imagine). Good. If it improves practice and makes your (and my) job easier and more effective, I’m all for it.
Here is an updated list of links to the checklists I’ve posted:
January 31, 2011 § Leave a comment
An important factor in determining whether to award alimony is the tax consequences of the court order. We all know that periodic alimony is income to the payee and deductible by the payer if it meets the IRS’s requirements.
So what does the IRS consider to be the essential ingredients of an alimony award, either by agreement or by adjudication? Section 71(b) of the Internal Revenue Code (IRC) provides that the following must apply:
- There must be cash payments to the recipient or third-party payments;
- Payments must be required by a written instrument;
- Instrument must not designate the payment as “not alimony” or as some other form of payment;
- The payer and payee must not be members of the same household;
- Payments may not be treated as child support;
- Payments must cease on death of the recipient;
- The parties may not file a joint tax return.
Payments that will not be treated as alimony by the IRS include: child support; noncash transfers; payments that are part of a spouse’s community property income; payments for use of property; and payments for maintainenance or upkeep of the payer’s property. Lump sum alimony, which is really an equalizing payment in equitable distribution, is not considered alimony by the IRS.
If you’re planning to use the form to prove the tax effects of alimony that I posted previously, you need to update it to conform to the latest version of IRC § 71(b).
It’s important to give some thought to these provisions regardless of which side you are on in an alimony dispute. If you represent the client trying to get some cash, you might consider proposing to the court or negotiating for it to be in the form of a property division; as such, it would not be considered income. Likewise, you can propose to the judge or negotiate for the payment to omit one of the ingredients above. If you represent the party who will have to pay, make sure you get all of the essential ingredients included so that your client’s payments will be deductible.
September 2, 2010 § 3 Comments
Armstrong vs. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993), sets out the factors that the trial court is supposed to consider when adjudicating whether to award alimony, and if so, the form, duration and amount.
All of the Armstrong factors are important, and failure to prove even one can doom your claim. One of those factors is “The tax consequences of the spousal support order.”
There are only two ways to establish the tax consequences: (1) Have an expert testify or offer into evidence a learned treatise; or (2) Agree with opposing counsel what they are and present the agreement to the court.
It doesn’t take a legal scholar to appreciate the advantages and disadvantages of these approaches. An expert can offer clarity, but she can be asked about so many extraneous matters on cross until the court is bewildered. A learned treatise can be precise and clear, but you still need to lay a foundation for it with an expert in most cases. In either case, experts are expensive.
By contrast, it doesn’t take much to convince opposing counsel that it is to both parties’ benefit to enter into a stipulation as to the tax consequences. That way, both parties have evdence in the record for the court to consider, and if the case is appealed, the Court of Appeals is not left scratching its collective head about why there is no proof of the tax consequences.
Back when I was practicing, several of us attorneys colluded and came up with a form for a stipulation. I believe it covers every base. It was done several years ago, and may not reflect intervening changes in the tax code, but it will at least provide a template for you to adapt to the current law.
Here is the form:
|MISSISSIPPI CASE LAW||FEDERAL INCOME TAX|
|“Lump-Sum Alimony”||“Lump-Sum Alimony”|
|Represents part of the equitable distribution of the marital estate. Is a fixed sum not subject to modification. Obligation to pay continues after the death of the payee or payer.||Represents a property settlement for income tax purposes and is not taxable by the payer or taxable to the payee. Is not alimony for income tax purposes because payments would continue, by operation of law after the payee’s death.|
|“Periodic Alimony”||“Periodic Alimony”|
|Is based on the payer’s duty to support the payee in the manner to which she or he had become accustomed, is modifiable and terminates on payee’s remarriage, death, or payer’s death.||Is tax deductible by the payer and taxable to the payee; i.e., qualifies as alimony for tax purposes. The reason periodic alimony qualifies as alimony for tax purposes is because under Mississippi law there is no liability to make any payment (in cash or property) after the death of the recipient spouse.|
|“Rehabilitative Alimony”||“Rehabilitative Alimony”|
|Is for a fixed term, but is modifiable.||If the liability to make the payments stops after the death of the recipient spouse, then rehabilitative alimony would qualify as alimony for income tax purposes.|
The payment is in cash.
The instrument does not designate the payment as not alimony.
The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
The payment is not treated as child support.
The obvious advantage of the stipulation is that it establishes the fact without expense and both parties have the information in the record. Unfortunately, this is an element of alimony proof that is almost never addressed by the attorneys in a trial, and it could cost your client dearly.
August 27, 2010 § 19 Comments
A practice tip about trial factors is here.
Armstrong vs. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993), sets out the factors that the trial court must consider and address in making a determination about whether to award periodic and/or rehabilitative alimony. They are:
- The income and expenses of the parties.
- The health and earning capacities of the parties.
- The needs of each party.
- The obligations and assets of each party.
- The length of the marriage.
- The presence or absence of minor children in the home, which may require that one or both parties either pay, or personally provide, child care.
- The age of the parties.
- The standard of living of the parties, both during the marriage and at the time of the support determination.
- The tax consequences of the spousal support order.
- Fault or misconduct.
- Wasteful dissipation of assets by either party.
- Any other factor deemed by the Court to be “just and equitable” in connection with the setting of spousal support.
Before the court can reach the issue of alimony, the court must first adjudicate equitable distribution and determine whether any need for alimony can be alleviated by a greater share of equitable distribution. This means that the factors for equitable distribution (Ferguson factors) must be presented in alimony cases. If, after equitable distribution, the court finds that the needs of both parties are met and there is no disparity, the court does not consider alimony.
Professor Deborah Bell in her MISSISSIPPI FAMILY LAW treatise and her annual seminars has done some important research into how length of marriage and relative income affect awards of periodic, rehabilitative and lump-sum alimony. You should become very familiar with her work if you are going to take on an alimony case.
Caveat: This is an area of the law in flux, and the cases are significantly fact-driven. You should do some research for authority supporting your position pro or con before going to trial. There is plenty of case law on both sides of the issue.