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Lev
Lev, Tax Advisor
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My divorce decree gives my ex wife 46% of my military retirement

Customer Question

My divorce decree gives my ex wife 46% of my military retirement pay. There is no language in the divorce decree stating this communial property. Can I use the amount given to her as a deduction for alimony?
Submitted: 5 years ago.
Category: Tax
Customer: replied 5 years ago.

McMinnville, Oregon


Already Tried:
I was audited by the Dept Of Revenue and that stated the money my ex wife received was not alimony for 2005, 2006 and 2007, however the IRS audited me in 2007 for alimony paid to my ex wife for 2005 that I claim for her portion of my military retirement pay. The IRS said everything was okay after review of the divorce decree and Former spouse distribution statement supplioed by the DFS. I have not did anything as of yet, just receive the info from the Dept of revenue. I was divorced in Idaho in 2002 while still in the military.
Expert:  AttyKLG replied 5 years ago.
I need to understand what the agreement says and also what you're asking. Are you saying that the agreement says that you owe spousal support and then separately you owe her 46% of your retirement pay? And you want to know if you can pay her the 46% of your retired pay directly and then deduct that amount from her spousal support payment? Also, why didn't your former wife receive her alimony in 2005, 2006, and 2007?
Customer: replied 5 years ago.
Sorry I did not explain it correctly. My exwife was awarded 46% of my military retirement pay as stated in the divorce decree. Each month she receives her portion of my pay, and I receive my share. My lawyer explain to me that I could claim this as alimony, and I have ever since 2002. The divorce degree does not contain any language that said her shair is community property, its states she is entile to 46% of my retirement pay and any Cost Of Living Adjustment granted to me each year she would get her share as well. The IRS audited me in Sept 2007 about the money paid to my exwife in 2005 that I claim as alimony, I sent them the requested documents and in Dec 2007 they replied the alimony claim was okay. Now the State of Oregon is saying the alimony claim in 2005, 2006 and 2007 is not alimony but her share of my retirement pay is community property. I have claim this deduction since 2002 and if the IRS has no problem with my deduction, why do I have to pay Oregon for this deductions?
Expert:  Lev replied 5 years ago.

According to the Uniformed Services Former Spouse Protection Act 1982 (USFSPA) - state courts are allowed to treat disposable military retirement benefits either as property solely of the member, or as property of the member and a spouse in based on the state laws.

 

If that payment is an alimony or a property settlement - should be clearly identified in the divorce decree.

In case of property settlement - the Department of Defense (DOD) would make direct payments of your retired pay to the ex-spouse and will report payments on her name and SSN.

 

In order to be treated as deductible alimony, payments made from you to your spouse (or ex-spouse) must meet all of the following requirements:

  • The payments must be in cash, check, or money order.
  • The payments must be received by or on behalf of your spouse under a divorce or separation document (including a final decree, a temporary court order, or a written separation agreement between the two of you). Payments you make to third parties on behalf of your spouse, such as for your spouse's medical expenses, housing costs, taxes, tuition, etc., can qualify.
  • You and your spouse must not opt out of alimony treatment by stating in the divorce decree that the payments aren't to be considered alimony for federal income tax purposes.
  • If you and your spouse have received a final decree of divorce or decree of separate maintenance, you may not be living in the same household when the payment is made. If the payment was made under temporary orders and the decree is not yet final, it is okay to be living in the same home.
  • The payer's obligation to make payments must end when the recipient dies, and there must be no liability to make any payment in cash or property as a substitute after the death.
  • You and your spouse may not file a joint tax return with each other for the year.
  • If any portion of the payment is considered by the IRS to be child support, that portion can't be treated as alimony.

See for reference the IRS publication 504 - http://www.irs.gov/pub/irs-pdf/p504.pdf

If any of these requirements are not clearly written in the divorce decree - payments are likely be classified as Property Settlement. For instance - in case your spouse dies - do you still have obligations to pay part of your retired pay to her heirs?

If yes - here are some court cases to support your position:

http://www.allbusiness.com/government/government-bodies-offices-government/8916742-1.html
http://www.allbusiness.com/government/government-bodies-offices-government/6622472-1.html
http://www.allbusiness.com/legal/trial-procedure-decisions-rulings/6622462-1.html

 

 

Customer: replied 5 years ago.
If the IRS accepted my divorce degree and documentation of money paid to my ex wife out of my retirement pay as alimony, then what grounds do the state have in disregarding my deduction?
Expert:  Lev replied 5 years ago.

The IRS acceptance has nothing to do with the State of Oregon DOR acceptance.

While you may use the IRS acceptance as an argument in your litigations - the Oregon DOR is not obligated to agree with the IRS.

 

You need to review your divorce decree to verify if wording in divorce decree met the definition of alimony - if not - you need to go back to your attorney and modify the divorce decree.

 

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22644
Experience: Taxes, Immigration, Labor Relations
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Customer: replied 5 years ago.

This is a very controversal subject and each state has there interpretation. Oregon is trying to recover revenue, there is not a big contengency of military here, so this new ground for them. My divorce decree does not contain any language stating military retirement pay is community property, but comes under personnal property. I am lauching an appeal siting that the language in my divorce degree meets IRC 71 and is classified as alimony. I have information of court cases on this same matter where the courts decided that military retirement is alimony.

Expert:  Lev replied 5 years ago.

Hi Jerry,

If you saw court cases I referenced - you might notice that the key point in the divorce decree for payments to be treated as alimony is

  • in case your spouse dies - you do have obligations to pay part of your retired pay to her heirs.
  • in case you die - all payments are terminated

If your divorce decree was written poorly and do not have all required wording - I suggest to go back to your attorney and modify it.

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