Academic journal article Journal of Accountancy

Alimony Determined

Academic journal article Journal of Accountancy

Alimony Determined

Article excerpt

The doctrine of collateral estoppel did not bar the IRS from assessing a deficiency for an underpayment it had conceded in a Tax Court stipulated decision concerning the same issue in the immediate prior tax year, the Tax Court held. The underpayment stemmed from what the IRS ultimately claimed, and the Tax Court agreed, was an improper alimony deduction.

Joseph and JoAnn Rodkey agreed to a property settlement as part of their 2004 divorce decree. It required Joseph Rodkey to pay his ex-wife $3,200 per month, stating the payment would be deductible by him and taxable to her for federal tax purposes. However, it also stated that $1,700 of the amount was child support and that, if the ex-wife died or remarried, the $1,700 child support would continue but the $1,500 alimony would terminate. Joseph Rodkey claimed an alimony deduction of the full $3,200 a month, or $38,400 annually, in 2005 and 2006. Alimony that meets the tests of IRC [section] 71 generally is deductible by the payor and includible in income by the recipient, but child support generally is neither deductible nor taxable.

In 2007 the IRS sent Joseph Rodkey a notice of deficiency disallowing the alimony deduction for 2005. He petitioned the Tax Court to determine the amount of alimony On March 19, 2008, the IRS entered a stipulated decision in the case allowing the full deduction (the opinion doesn't indicate why). Two days later, the IRS sent him a notice disallowing his 2006 alimony deduction. He filed again with the Tax Court, arguing the Service was barred by collateral estoppel from reasserting its previously conceded position in an adjudication. …

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