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Tax Aspects of Divorce:The support test is based upon the amount of support and not upon the period of time over which it is given unlike the tests for head of household in the costs of maintaining the principal place of abode. It includes the fair market value of goods or property used for support. Reg. Sec. 1.152-1(a)(i) lists the following examples of items constituting support:
- Food and clothing
- Lodging (caution, see below)
- Medical, dental care
- Education
- Life insurance premiums (paid by custodial parent on the life of the non-custodial parent with children as beneficiaries)
- Property, gifts
- The cost of services rendered by others, but not the value of services rendered by the taxpayer
- Rental value of furnishings
- Welfare benefits, life insurance proceeds, and other non-taxable income
Where there is joint ownership of the home that is the principal place of abode of the child before separation, the Service states, "If the person lives with you in a home that is jointly owned by you and your spouse or former spouse, and each of you has the right to use and live in the home, each of you is considered to provide half of the person's lodging. However, if your decree of divorce gives only you the right to use and live in the home, you are considered to provide the person's entire lodging. This is true even though legal title to the home remains in the names of both you and your former spouse" (Publication 504 (1998), page 7). The publication does not address the situation of when their residence is leased or rented.
However, the Tax Court in Correale, clearly states that when the special support tests for divorced or separated parents under Section 152(e) does not apply, general support tests of section 152(a) apply. That is, the taxpayer must provide over the support of the child (and satisfy the other requirements discussed under Dependents) to claim the dependency exemption. Actual payments by the spouse determined the support furnished, ignoring the form of home ownership or the use and occupancy rights of the spouses.
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| Divorce Tip: # 23Marriage is an economic partnership. Much like a business relationship. Each state has unique, but similar statutes that clearly define how the distribution of property occurs when you decide to get a divorce. A lot of these statutes are available right online! Sponsored by: Perfect Partners |
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