Tax Court in Brief | Ibrahim v. Commissioner | Deduction of Alimony or Separation Maintenance Payments

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The Tax Court in Brief – May 16th – May 20th, 2022

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Tax Litigation:  The Week of May 16th, 2022, through May 20th, 2022

Ibrahim v. Commissioner, TC Summary Opin. 2022-7 | May 16, 2022 | Weiler, J. | Dkt. No. 10750-20S

Summary: Dr. Jihad Y. Ibrahim (“Ibrahim”) and his wife, Cheryl Edington (“Edington”) separated in year 2016 and ultimately divorced in 2017. As part of the separation agreement that was approved by a state court during the divorce proceeding, Ibrahim agreed to pay Edington $50,000 to assist in her relocation and legal fees. The amount was payable in monthly installments, but the balance was to be paid in full at the time a final decree was entered. The marital agreements and the judgment each contained statements indicating that neither Ibrahim nor Edington would pay maintenance to the other. Ibrahim paid $1,200 to Cheryl in 2016 and $48,800 in 2017. On his 2017 Form 1040, and pursuant to 26 U.S.C. § 215(a) (repealed), Ibrahim claimed a $50,000 deduction for “Alimony paid.” Upon examination of that return, the IRS disallowed the claimed $50,000 alimony or separate maintenance deduction and assessed an accuracy-related penalty. Ibrahim challenged that determination.

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Insights: Congress repealed sections 62(a)(10), 71, and 215 for all divorce or separation agreements executed or modified after December 31, 2018. For divorce or separation agreements that are not affected by the repeal, and before claiming a deduction on what is believed to be alimony, a taxpayer should closely evaluate all applicable divorce decrees and separation agreements to ensure that each of the four requirements of I.R.C. §§ 71(b) and 215(b) are met.

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