Sound familiar? The payments in post-separation Years One, Two, and Three were made according to the separation agreement; they were made in cash to the former spouse. The agreement indicated that the payments were alimony and the parties expected that they would be deductible by the payor and taxed to the recipient. The CPA preparing the payor’s tax returns for Year Three just called to say that $35,000 of the payments made in Year Two will be recaptured in Year Three as income.
How did this happen?
As required by the separation agreement, the recipient received $100,000 per year in the first …read more
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