Tax Consequences of Post-Dissolution Support Payment Arrangements

The economic settlement accompanying a marriage dissolution may consist of one or both of the following: (1) the initial property settlement, sometimes referred to as a division of property when only community property is involved; and (2) provisions for maintenance payments categorized as alimony, child support, or some combination thereof. The tax problems of property settlements have been analyzed previously by the author. They are considered here only to the extent necessary to distinguish property settlements paid in installments from periodic maintenance payments made for the support of a former spouse, or for children of the marriage, or both. The primary concerns of this article are the tax consequences of alimony and child support payments. Federal income tax law recognizes marriage as a status involving unique tax benefits and burdens. The following are examples of some of the benefits: (1) a wage-earning spouse is not taxed on the imputed income enjoyed from services rendered in the home by the other spouse or by children of the marriage; (2) parents may obtain exemption allowances for their children and certain deductions for expenses of dependents, including expenses for medical care and child care. On the other hand, payments to or for the support of a nonworking spouse or child are not deductible by the payor and are not income to the beneficiaries of such payments. Although this rule may not be a tax burden, it can certainly be considered to be the denial of a plausible tax benefit. Another potential tax burden of marriage was established by the Tax Reform Act of 1969 which applies four separate tax rate schedules in ascending order of severity to: (1) married individuals filing joint returns (and certain surviving spouses); (2) heads of households; (3) unmarried individuals (other than surviving spouses); and (4) married individuals filing separate returns (and estates and trusts). Whether or not these new rate schedules make marriage a tax benefit or burden depends on the taxable income of each spouse. The history and effect of these rate schedules have been examined elsewhere. The fourth category does not apply to unmarried individuals, and married taxpayers will not ordinarily use it because of its high rates. It is available in the case where one spouse, for whatever reason, refuses to sign a joint return with the other spouse. Briefly, considering only the first three categories, the aggregate tax for two individuals having equal incomes will be less if they are unmarried than if they marry. Where incomes are widely disparate, or where one spouse has no income and the other spouse has considerable income, marriage will usually cause the aggregate taxes of the two individuals to be reduced. However, marriage has the general effect of increasing aggregate taxable income of two individuals by forcing them to share one standard deduction and by otherwise limiting their deductions

Liquidations and Reincorporations—Before and After Davant

Liquidations and reincorporations have been utilized in attempts to bail out corporate earnings and profits at capital gains rates. The success of these attempts has been limited by judicial extension of the corporate reorganization sections of the Internal Revenue Code. Professor Hjorth suggests that specific Congressional amendment of section 331 to encompass the liquidation reincorporation problem is preferable to extension of the reorganization provisions which occurred in the recent case of Davant v. Commissioner

The Common Agricultural Policy: Crisis in the Common Market

The future of this common agricultural policy, as well as that of the European Economic Community itself, however, has been made somewhat uncertain by France\u27s decree, on July 1, 1965, of a temporary boycott of the meetings of the Council of Ministers of the Community due to a failure to agree upon the method of financing the Community\u27s agricultural policy. This boycott may well have triggered the most serious crisis in the bloc\u27s seven year history, because the dispute is thought by some to be a mere symptom of a more fundamental conflict between France and her Common Market partners. The issue in that conflict is whether the Common Market is to become an integrated entity of member nations, or is rather to be only a loosely-knit organization of states as envisioned by French President De Gaulle. Because the integration of planned agricultural economies requires a greater degree of supranationalism than does the integration of freemarket industrial economies, it is natural that the political differences between De Gaulle and his partners should clash most vividly in the execution of the common agricultural policy. The purpose of this article is to review this common agricultural policy and its implementation. Apart from considerations of European unity, the common agricultural policy is of significance to exporters of American agricultural products. The value of annual exports of these products amounts to about five billion dollars, of which one and three-tenths billion dollars has been sold to Common Market countries alone. The common agricultural policy should also concern legal scholars because it is probably the most highly developed form of supranational law and institutional regulation in the world.\u2

Special Estate Tax Valuation of Farmland and the Emergence of a Landholding Elite Class

Examines Internal Revenue Code provisions on farmland as an inheritable asset, including those provisions that offer substantial tax savings

Divorce, Taxes, and the 1984 Tax Reform Act: An Inadequate Response to an Old Problem

This article analyzes in detail the provisions of the 1984 Tax Reform Act relating to property settlements and cash payments made pursuant to divorce. It concludes that the provisions relating to property settlements are, on balance, beneficial, but that the changes relating to alimony and child support are almost totally devoid of merit. The article recommends that sections 71 and 215 be amended to provide that all cash payments made pursuant to divorce should be income to the recipient if those payments meet the formal requirements of new section 71(b). Even if the payments are income to the recipient, however, the payor should not be able to deduct payments unless the payor can show that they are in the nature of support payments, as under prior law. Special rules relating to excess frontloading of alimony payments (the six-year rule and the alimony recapture rule) should be repealed. Because no cogent reasons have been advanced for repealing the Lester Rule, this article recommends that the Lester Rule be reinstated by a provision permitting child support payments to be deducted by the payor if the parties agree that the payee will report the payments as income

An Introduction to Capital Gain and Losses

In this article, originally prepared for his class in federal income tax, Professor Hjorth explores the theoretical bases and working principles underlying the taxation of capital gains and losses. Beginning with a review of basic federal income tax concepts and the provisions governing computation and recognition of all gains and losses, he proceeds through a comprehensive discussion of the basic Code provisions governing capital gains and losses. Additional discussion focuses on the specialized treatment afforded quasi-capital assets, copyrights and patents, inventory, discount bonds, short sales, small business stock, and foreign corporations

Joan Fitzpatrick: In Memoriam

Joan Fitzpatrick graduated from Harvard Law School in 1975. Women were then beginning to enter the legal profession in increasing numbers, but role models were still important in encouraging women to become equal partners in our profession. Joan was an especially effective role model for our students. I think she realized that. It was one of the things that drove her to excel in everything she did. Joan told me—more than once in fact—that she earned every penny she made. It was a point of pride to her. She was a hard worker whose work yielded very important results. And she was the kind of teacher who would make students think: If Professor Fitzpatrick can do that, then I can also do great and important things. Joan joined our faculty in 1984. In her eighteen years with us, she became an internationally known and respected authority on human rights. She was a primary author or editor of six books, the author or co-author of fourteen book chapters, and the author or co-author of about forty scholarly articles. Joan spoke on issues of international human rights throughout North America and Europe. In the words of one of her admirers, she was brilliant, eloquent, and internationally renowned

Liquidations and Reincorporations—Before and After Davant

Liquidations and reincorporations have been utilized in attempts to bail out corporate earnings and profits at capital gains rates. The success of these attempts has been limited by judicial extension of the corporate reorganization sections of the Internal Revenue Code. Professor Hjorth suggests that specific Congressional amendment of section 331 to encompass the liquidation reincorporation problem is preferable to extension of the reorganization provisions which occurred in the recent case of Davant v. Commissioner

Community Property Marital Settlements: The Problem and a Proposal

This article is an attempt to deal with the larger whole of community property divisions. It concludes with a proposal that, inasmuch as marriages in community property states are similar to partnerships, the dissolution of marriages should be treated for tax purposes in a manner similar to the dissolution of partnerships

In Memoriam: Professor Emeritus Richard O. Kummert

The Washington Law Review dedicates its October 2012 issue to Professor Richard O. Kummert who passed away last April at the age of seventy-nine. Professor Kummert served as the faculty advisor to the Washington Law Review for over four decades. The success of this publication owes, in many ways, to Professor Kummert\u27s steadfast guidance. The following memorial remarks come from his former students, colleagues, and friends. Many, but not all, of these remarks have been graciously adapted from speeches given at Professor Kummert\u27s memorial service, which was held at the University of Washington School of Law on April 29, 2012