Alimony Taxation – Part 6

Alimony, also known as Spousal Support in California, is GENERALLY deductible to the payor and taxable income to the payee. I highlighted the word generally because the mere use of the term Alimony or Spousal Support in a settlement agreement does not affect the tax consequences of payments. Internal Revenue Code Section 71 contains eight requirements that must be met for a payment to be considered taxable to the recipient and tax deductible to the payor. I will review all eight in the coming weeks.

REQUIREMENT # 6 – THE PAYMENT MUST TERMINATE AT THE RECIPIENT SPOUSE’S DEATH

I.R.C. § 71(b)(1) provides that the “term alimony or separate maintenance payment” means any payment in cash if —

(D) There is no liability to make such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property ) as a substitute for such payments after the death of the payee spouse.