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1 (May 30, 2002)

handle is hein.crs/crsagzz0001 and id is 1 raw text is: Order Code RS20004 Updated May 30, 2002 Tax Implications of Divorce: Treatment of Alimony, Child Support, and the Child's Personal Exemption Louis Alan Talley Specialist in Taxation Government and Finance Division Summary Alimony payments are deducted from adjusted gross income by the spouse making payments and included in the income of the former spouse receiving payments. Child support payments are viewed as intrafamily transfers of funds that absent divorce would not have given rise to federal income tax consequences and as personal, family expenses are not deductible in determining the taxable income of the spouse making payments or includible in income to the former spouse receiving the payments. The Congress resolved dependency exemption disputes by providing a rule: the custodial parent always receives the child's personal exemption unless the right to claim the child's personal exemption is waived in writing by the custodial parent. This report will be updated as events warrant. Alimony Payments It was 4 years after enactment of the income tax before the tax treatment of alimony payments was determined by a 1917 Supreme Court ruling commonly referred to as the Gould case. The case law stood from 1917 to 1942 in the absence of a statutory Internal Revenue Code provision. In the period between 1917-1942, alimony was not included in the recipient's income and was not deductible by the payor. This tax treatment was changed in 1942. Congress was concerned that the payor was fully taxable on all income even though a portion of that income (alimony) was not available from which to pay taxes. It was feared that the combination of alimony and the increased taxes due to high wartime tax rates would not leave taxpayers with sufficient resources with which to meet their tax obligations. Accordingly, the Revenue Act of 1942 taxed alimony to the former spouse receiving payments and permitted an income tax Congressional Research Service + The Library of Congress CRS Report for Congress Received through the CRS Web

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