In: Accounting
A divorce agreement entered into in 2017 requires Alice to pay her former spouse $50,000 a year for the next ten years. Will the payments qualify as alimony? Why or why not?
Qualification as Alimony
Alimony means an imbursement to spouse or former wife under separation or separate instruments. It does not comprise unpaid expenditures made under separation. This allowance is deductible in the hands of spender and consider as gross income in the hands of recipient.
A has to pay $50,000 a year to her former spouse for next ten years as per divorce agreement. Hence as per above definition this payment should be considered as alimony. This payment is not considered as exception mentioned law which is as follows:
1. Juvenile Provision.
2. Non cash property payments.
3. Expenditures that are the assessee’s wife’s part of communal revenue.
4. Expenditures to keep up the spender’s possessions.
5. Use of the payer’s possessions.
Alimony means an imbursement to spouse or former wife under separation or separate instruments.