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Old 04-20-2015, 10:40 PM
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Alimony recapture plz help

I have a homework problem and I'm trying to understand alimony recapture.

Scenario

Husband and wife divorce Dec. 31 2011. In 2012 Husband paid 65,000 to wife, 2013 40,000, 2014 15,000 and 2015 5,000.

What us the tax consequence of all years?

Thank you!



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Old 04-21-2015, 10:41 PM
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Quote:
Originally Posted by michael820 View Post

Husband and wife divorce Dec. 31 2011. In 2012 Husband paid 65,000 to wife, 2013 40,000, 2014 15,000 and 2015 5,000.

What us the tax consequence of all years?

Thank you!
Recapture applies to alimony payments when the amount paid decreases by more than $15K annually within a 3 year period after a divorce. For example, if in the first year you pay $$65K in your case in alimony, then in the second year you pay $40K in alimony, but in the third year you successfully motion to modify your obligation because your ex has a new job and, as a result, you only pay $15Kin alimony $25K less than the second year), you’ve triggered the recapture rule. As in a three-year period, your alimony decreases by more than $15K from the amount of the preceding year, the IRS considers the payments as property distribution and recaptures the obligor’s a payer, income retroactively. Thus, the IRS recovers the tax benefit of a deduction or a credit taken by you, a taxpayer and disallows the deduction. The rules for the recapture are complex and vary depending on the year the decree was granted.

You need to prepared to report the first year’s worth and the second year’s worth of formerly deducted alimony payments as income. And you thought you were doing yourself a huge benefit by petitioning to modify the alimony obligation in the third year



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Old 07-24-2015, 05:08 AM
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There is also a rule stating "If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted".

Thanks for sharing..



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