Divorce Tax Reform Two Years After Passage: What Hath Congress Wrought?
| Author | Mark Ashton |
| Pages | 28-31 |
28 FAMILY ADVOCATE www.shopaba.org
Divorce Tax Reform Two Years After Passage
What Hath Congress Wrought?
By MARK ASHTON
the trust assets on a permanent basis. e question then
became whether the income used to provide for a wife or
widow’s needs was income taxable to her or not. e U.S.
Supreme Court addressed that question with some frequency
in the 1920s and 1930s.
If funds set aside for the support of a spouse could have a
tax-ecient aspect by moving the tax burden from Mr.
Bigbucks to his dependent spouse or widow, would it not
make sense that direct payments from him to the same
spouse from current income should also be deductible by
him and taxable to her? In 1942 the Internal Revenue Code
adopted the concept that payments of alimony could be
deductible without regard to whether they were from a trust
or remitted from the payor’s own current income. is
evolution had a scal impact for those who project govern-
ment revenues. en and now, relatively few Americans have
sucient income-producing assets to create trusts to fulll
support obligations to family members. And the idea that a
man would have to pay tax on income destined to go to his
wife seemed inequitable. By 1965 the IRS instructions made
History has taught both accountants and
lawyers that changes in the law come
slowly and are more often the product
of evolution than revolution. Students
of federal income tax history in this
country can look back 90 years or more
to the instructions attached to the rst tax returns and nd
many common principles and methods to determine what
income is taxable and how.
Alimony Dies a Sudden Death
e tax deduction for alimony has a similar history. It began
with tax laws adopted by Congress in the 1920s that
permitted men to assign assets to the “use” of their spouses
for their support. Men had long been obligated to support
their wives both in life and following death. A husband who
failed to do so risked a claim for spousal support or a claim
against his will if he did not provide adequately for a
surviving spouse. To address this, trusts were created to make
those provisions without actually parting with ownership of
Published in Family Advocate, Volume 43, Number 1, Summer 2020. © 2020 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof
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