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61 N.Y.U. L. Rev. 363 (1986)
Unfinished Reform: The Tax Consequences of Divorce

handle is hein.journals/nylr61 and id is 377 raw text is: NEW YORK UNIVERSITY LAW REVIEW VOLUME 61 JUNE 1986 NUMBER 3 UNFINISHED REFORM: THE TAX CONSEQUENCES OF DIVORCE LAURIE L. MALMAN* Professor Malman examines the tax consequences of divorce in the wake of the Tax Reform Act of 1984. She notes that while the 1984 reforms simplified the tax treat- ment of divorce, they did not go far enough. Professor Malman argues that although an ideal system would distinguish between payments of future income and payments for property, such a distinction is administratively impractical and is not worth its min- imal revenue advantages. She suggests a rule that allows former spouses to designate the nature of cash payments made to one another, with fallback provisions that would operate in the absence of taxpayer election. INTRODUCTION Prior to the enactment of the Tax Reform Act of 1984 (1984 Act),1 federal income tax treatment of marriage dissolution was complex and confusing. While tax rules were intended to rest on state family law, the substantive law concepts on which the rules were based had become out- moded. As a result, federal tax rules increasingly diverged from the prin- ciples of modem divorce law. In addition, tax results often turned on the vagaries of particular state rules. Taxpayers in different states received * Professor of Law, New York University School of Law. B.A., 1968, Vassar College; J.D., 1971, New York University. The author wishes to thank her colleagues, Professors Brookes Billman, Noel Cunning- ham, Lawrence Lokken, Deborah Schenk, Helen Scott, Linda Silberman, John Steines, and Diane Zimmerman, at New York University School of Law, Professor Joan Wexler, at Brook- lyn Law School, and Arthur B. Malnan, for their criticisms of earlier drafts of this Article, and Laurel Rotker for her assistance in the preparation of this Article. The author would also like to acknowledge the generous support of the Filomen D'Agostino and Max E. Greenberg Research Fund of the New York University School of Law. I The Tax Reform Act of 1984, was enacted as part of the Deficit Reduction Act of 1984, Pub. L. No. 98-369, 98 Stat. 494 (codified in scattered sections of 26 U.S.C.). As this Article went to press, Congress enacted the Tax Reform Act of 1986 (1986 Act), Pub. L. No. 99-514, 100 Stat. 2085 (to be codified in scattered sections of 26 U.S.C.). All citations to codified sections of the 1986 Act will refer to U.S.C.A. Special Pamphlet (West 1987) (codifying the Tax Reform Act of 1986). The main body of this Article does not incorporate any provisions of this legislation. Relevant amendments to the 1984 Act are noted in footnotes. 363 Imaged with the Permission of N.Y.U. Law Review

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