Taxes and Divorce

I don't claim to know much about taxes and divorce.  I always advise my clients that any tax issues need to be reviewed by an accountant prior to divorce.  It is a good idea to put a disclaimer in the property settlement concerning whether the client has been advised of the tax consequences by you as the attorney.  Nevertheless, here are a few things that are pretty basic clients and attorneys need to be aware of:

(1)   If children are involved, who gets to claim the deduction needs to be addressed in the divorce decree.  A useful article explaining this is located here.  If the issue is being litigated, the parties need to put on some proof under Louk v. Louk, 761 So.2d 878, 884 (Miss. 2000).  Those factors are 1. The value of the exemption at the marginal rate of each parent; 2. The income of each parent; 3. The age of the children and how long the exemption will be available; 4. The percentage of the cost of supporting the children borne by each parent; and 5. The financial burden assumed by each parent under the property settlement agreement in the case. 6. Value of non-economic but valuable contributions by custodial parent - Laird v. Blackburn, 788 So.2d 844, 852 (Miss. App. 2001).   If no proof is put on, whoever gets custody gets the deduction by default under IRS regs.

(2)  In order for the parties to file a joint return, the parties must be married through the end of the year.  IRC 6013(a) and 7703(a)(1).  Rough translation, you divorce on December 31, cannot file joint return.  

(3)  Alimony is deductible by the payor and income to the payee.  The parties may specifically agree in the property settlement that it is nontaxable to the payee.  Here is a that has some helpful information on that.  Also, for it 

(4)  A divorced spouse may seek innocent spouse relief under IRC 6013.  

There are all kinds of little issues that especially with high income individuals a CPA needs to review.