Attorney-at-Law

SHORTCHANGING US

In Uncategorized on 07/19/2018 at 01:13

Judge Buch gets it mostly right in this off-the-bencher, Gretchen Sue Humiston, 27125-16S, filed 8/18/18. But he gets the last part wrong.

When Gretchen Sue split from unnamed ex-husband, their divorce lawyers got it entirely right, both with the Matrimonial Settlement Agreement and the subsequent modification thereof. Parties no longer living together, decree of divorce, MSA explicitly states cash payments made for a fixed term of years not contingent on any child, MSA explicitly states deductible by husband and income to wife, and payment terminates with death of either. So it’s truly alimony.

Except. Ex-husband didn’t pay, so modification agreement. But payments as modified thereunder still terminate with death. So still alimony.

Except. Ex-husband had to pay on life insurance policy on Gretchen Sue, with their kids as beneficiaries. Gretchen Sue says that substitutes for ex-husband’s payments if she dies, thus payment doesn’t terminate with her death. So Gretchen Sue doesn’t pick up the payments she got from ex. She claims it’s a property settlement, not alimony.

IRS does pick it up, and hits Gretchen Sue with a SNOD.

Judge Buch: “Ms. Humiston’s arguments as to why the payments should be treated as property settlement are unavailing. She argues that the payments should not be considered as terminating after her death because the life insurance policy maintained on her is a substitute for those continuing payments. But that life insurance policy does not require any payments by Mr. Humíston after Ms. Humiston’s death.” Order, transcript, at p. 8.

Gretchen Sue is peeved that ex-husband has shortchanged her, so she shouldn’t have to pay tax on what she got.

“She notes her perceived irony at the fact that the shortfall in Mr. Humiston’s regular maintenance payments is roughly equal to tax liability differential that arises from including (for her) and deducting (for him) the regular maintenance payments.” Order, transcript, at p. 8.

OK, so Judge Buch got it right. The deal, as amended both in writing and by performance, is alimony; Section 71(b)(1) is satisfied.

But here’s where he gets it wrong.

“But Ms. Humiston does not get to make herself whole by shortchanging the Commissioner.” Order, transcript at p. 8.

No, sir, not the Commissioner…shortchanging you and me and every taxpayer who pays what they properly owe. The Commissioner is just an agent, collecting revenue to run the government. If someone pays less, we pay more.

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