Question

Payor spouse, who pays tax at a flat 30 percent rate, is required to pay payee spouse $100,000 per year as alimony or separate maintenance under a pre -2019 divorce instrument. Assume payee spouse wants to amend the divorce instrument to have the post - 2018 law apply (i.e. Sections 71 and 215 would no longer apply to the payments). You represent the payee spouse.

(a) If payor spouse requests a reduction in the paymens under the agreement to $70,000, what is your reaction?

(b) What result in (a), above, both spouses pay a flat 30 percent rate?

(c) What result in (a), above, if payor spouse pays tax at a flat 30 percent rate and payee spouse, who inherited money, pays a flat 35 percent rate?

Answer 1

(a)

Payor spouse has to deduct tds and paid the remaining $70000 so that the agreement under 2019law does not get effected

(b)

Payee spouse has to pay tax amount of $21000 as he/she has only that income

(c)

Payee spouse has to pay tax amount of $24500 as this is only the income source