Divorce decree & house refinance - taxes
My ex & I divorced in March 2006. As part of our divorce decree it states that the house we owned jointly must be refinanced by Oct 2006 to remove my name from the deed. At that time I should receive 50% of the equity in the house. My ex did refinance the house & I was issued a check for $12K. Now we are filing taxes. We're both filing separately, but he asked me to sign a letter stating that he had given me $12K. I took the letter to my accountant & he says I shouldn't use it because my ex stated that the money was alimony. No where in our divorce decree does it state that he is to pay me alimony. The refinancing of the house was not alimony payment it was as stated in the divorce decree what I was entitled to since it was half of our joint assets.
My question is should this really be called alimony? Also, do I need to count the $12K as income on my taxes? I am trying to avoid future repercussions with the IRS.
1 Answer from Attorneys
Re: Divorce decree & house refinance - taxes
Based on what you've said, the $12k you received is a lump sum property distribution which should not be taxable to you. If you sign a document saying the money is alimony, then that money can be deductible by your ex and taxable to you. If your ex wants you to sign some sort of receipt, it should say that he gave you the money pursuant to your divorce decree/settlement agreement and that the money represents a lump sum property distribution, NOT alimony. I would suggest you let your divorce attorney read over it before you sign it, just to make sure the language protects you from potential liability. Good luck!