Tax Brake with Robert G. Nath, Esq.

First, the alimony payment must be received by or on behalf of a spouse under a divorce or separation agreement. That means, among other things, that it has to be in writing. Second, the divorce or separation agreement may not designate the payment as “not includible in gross income” and not allowable as a deduction. In short, the agreement cannot designate the payments as non-alimony.

Third, the payee and payer can't be members of the same household at the time the payment is made. Fourth, there is no requirement to make the payments after the death of the payee spouse (or as a substitute for that).

In the case, the divorce instrument was silent on the last requirement. That was OK, since the law no longer requires that the instrument be explicit. But that leaves room for interpretation, and the court of appeals looked to state law to see whether the payment would terminate on death. No parts of the orders in the case were clear on this point. The result was a federal case that was expensive and cumbersome.

The court of appeals went on for pages on what Colorado law said about this silence. Concluding that the law was ambiguous, the court said the husband had failed to carry his burden to show the payments would cease on the death of his spouse.

This shows that as difficult as divorce can be, at least you want it over when it's supposed to be over. From the tax perspective, that means making sure your agreements conform to the tax code's requirements.