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Old 04-12-2010, 11:34 AM
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cash settlement taxable?

Hi,

I know the 3 months of alimony I received in 2009 are taxable, but what about the $10,000 cash settlement? It turned out that my husband had an income and principle from oil wells that I didn't know about even when we were married. In order to avoid a long and drawn out legal battle, he offered me the $10,000, as part of the settlement. I took this as division of marital assets, not alimony. It is not identified as a type of settlement in the decree, only that he agreed to pay that amount plus the alimony.

So do I need to pay taxes on $6000 or on $16,000?

Thanks so much for any assistance.



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Old 11-07-2010, 11:18 PM
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Join Date: Oct 2010
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"So do I need to pay taxes on $6000 or on $16,000? . . . It is not identified as a type of settlement in the decree, . . .
"--->It depends on the situation; if you designate the payments, $10,000, as “not alimony”( as you can see, cash settlements are generally going to be alimony) even if it is in cash, it will not be treated as alimony (alimony must be in cash but other requirements must be met in order to call it alimony; in other words, just because you receive a cash payment from your spouse does not mean it is alimony.) and thus will not be subject to tax.
$6,000 is your taxable income; $6,000(alimony).
I guess you need to discuss the entire settlement offer with your attorney, to make sure it is fair but also to minimize the tax impact.
For further info, please visit the IRS website:Publication 504 (2009), Divorced or Separated Individuals



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