Lump-Sum Payment Made Under Oral Agreement Not Alimony (Grosjean, Jr., TCS)

Code Secs. 71 and 215

A lump-sum payment made by an individual to his ex-spouse pursuant to an oral agreement to facilitate refinancing the ex-marital home’s mortgage was not alimony because the payment was not made under a divorce or separation instrument as required by Code Sec. 71(b)(1)(A). But, even if the payment was made pursuant to the parties’ divorce agreement, the agreement contained an explicit contingency related to the children with respect to the maintenance payments. The existence of the contingency triggered the application of Code Sec. 71(c)(1) and made the alimony payments nondeductible under Code Sec. 215. Therefore, even if the lump-sum payment was considered a maintenance payment made pursuant to a divorce or separation instrument, it was not deductible. Back references: 2011FED ¶6094.35 and ¶6094.60.

M.F. Grosjean, Jr., TC Summary Opinion 2011-75

Tax Research Consultant

CCH Reference – TRC INDIV: 21,200

CCH Reference – TRC INDIV: 21,204

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