Category Archives: Spousal Support

Spousal Support

“Africa Diamond Scam” Case Differentiates Alimony and Property Settlement

Marriage is a beautiful thing, and for some people, it is the key to long-lasting happiness and even personal wealth. But even the beauty of marriage can wilt and wither, and what was once a happy flourishing relationship can turn to separation and divorce. In those cases, no amount of money can buy back the happiness of the relationship, and the division of property that is the marker of a relationship ended ensues. When a marriage ends, it often brings with it issues of spousal support – and that spousal support can take different forms.

Alimony is the form of spousal support that most people are familiar with – it is the payment if funds from one spouse to the other for ongoing maintenance. Alimony is designed to allow a recipient spouse to take care of himself or herself. Property settlement, on the other hand, is the division of the assets of the marriage. It is the separation of those things that the marriage has jointly acquired between the two individuals as they move in separate directions.

These two concepts seem similar but have different consequences for tax purposes. Generally speaking, property settlement has few to no tax consequences. Alimony, on the other hand, is taxable as income to the receiving party and deductible as an expense by the paying party. The different treatment does not change whether you are dealing with a multi-million dollar marriage or something much smaller, though the tax amount varies considerably.

The recent Enron case interestingly has even touched the world of divorce and the separation of property with that goes along with it. Byron Georgiou, an attorney associated with the case, entered into a divorce just prior to the completion of that case. Pursuant to the divorce agreement, his ex-wife was to be entitled to 10% of the fees he received from the case. When the case settled, Byron was awarded $55 million in fees. His ex-wife, Maria Leslie, was therefore entitled to $5 million. The language of the marital settlement agreement had placed the provision related to the fee award in the section of the agreement related to division of property. It then used language that clearly identified it as spousal support that was intended to be taxable income for the wife.

The responsibility to pay taxes is a serious one, and the United States Tax Court does not make exceptions based on mental health or divorce. Ms. Leslie was recently in front of them for failure to pay taxes. She had multiple arguments regarding the amount of taxes she was due and for which tax year. Leslie had been scammed for $400,000.00 in an African diamond scam, and the issues before the court related to whether the funds were intended as spousal support or were instead a division of marital property.

Leslie was fortunate to have the court find that money she had been swindled in the scam was properly considered a theft loss that she could legally write off. However, the court also found that the income she received from her ex-husband’s participation in the Enron litigation was taxable income to her. The court found that the language in the agreement identified it as such, even though it was in the section of the agreement on property settlement and even though it did not include any provision for termination at the time of her death.

Teasing out whether support is intended to serve as alimony or as a property settlement can have major consequences for both spouses. That’s one of the reasons it’s so important to make sure your divorce papers are handled by an experienced attorney who is an expert in California divorce law. Contact the attorneys at the Law Offices of Judy L. Burger today to learn how our attorneys can help in your case: (415) 293-8314.

Get Ready for Next Tax Year: How Does the IRS Treat Spousal Support?
California Divorce, Spousal Support

Get Ready for Next Tax Year: How Does the IRS Treat Spousal Support?

If you are newly divorced or going through a divorce, you may be unsure how the Internal Revenue Service treats spousal support for tax purposes. Many people do not think about taxes until tax time rolls around. Of course, it is wise to be prepared on this issue, as receiving (or paying) spousal support will affect your tax bill and potentially lead to an underpayment that you will need to make up by April 15.

The Internal Revenue Service (IRS) treat spousal support, also called “alimony,” as income for federal tax purposes. The most important issue is what qualifies as alimony under federal tax law.

Alimony payments must meet all of the following qualifications:

  • The parties do not file a joint return.
  • The payments are made in cash, by check, or by money order.
  • The payment is received either by the ex-spouse or on that person’s behalf.
  • Neither the parties’ separation agreement nor a court decree says that the payment is not spousal support.
  • The responsibility to make the payments stops when the ex-spouse dies or remarries.
  • The payment is neither child support nor part of the parties’ property settlement.

The IRS specifically provides that the following do not qualify as alimony:

  • child support;
  • property settlements that are not made in cash;
  • payments that are intended to be a spouse’s share of community property income; and
  • payments made either to keep up or for the use of the paying spouse’s property.

The former spouse who receives the payments is required to report alimony as income for federal tax purposes. Likewise, the former spouse who makes alimony payments is entitled to a deduction for payments made.

Those who receive payments are required by law to cooperate by providing their Social Security number to the paying party. If receiving spouses do not do this, they may receive a $50 penalty. A party making the payments could not only receive a $50 penalty for failing to include the recipient’s Social Security number but also could see his or her income tax deduction disallowed.

Here are a few trickier situations that require competent financial or legal advice:

  • payments made to a third-party under a separation agreement, a divorce decree, or at the written request of the receiving party;
  • payments for life insurance premiums for the benefit of the receiving spouse, if they are required by court order or a written separation agreement; and
  • certain mortgage, real estate tax, or house insurance payments.
If you are not sure whether to claim alimony as income or a deduction, you should consult with an experienced California lawyer. The attorneys at the Law Offices of Judy L. Burger will provide authoritative legal support tailored to your specific situation. Make the call today to learn how our attorneys can help: (415) 293-8314.
Modification of Spousal Support
Spousal Support

Modification of Spousal Support


One of the most difficult aspects of divorce is spousal or domestic partner support. When matters of the heart are involved, financial matters because even more hotly contested. Modification of support orders is no exception, as they involve the ability of the payer to pay and the need of the payee for financial support. If you are unfamiliar with spousal support in California, please see my prior blog here.


The threshold issue is whether the parties have agreed or a judge has ordered that spousal support may not be modified. If the parties agreed that it could not be changed, they will be bound by that agreement. Likewise, if a judge’s support order does not allow for change, no request to modify it will be granted.


If neither an agreement nor an order bar modification, the parties may agree to change the amount of spousal support themselves. If they do, before it is legally enforceable, they must ask a judge to approve it and enter it as an order of the court.


If the parties cannot agree, one of them may file a request with the court to modify the amount. The party making the request will have to show that there has been a change in circumstances that warrants a change in the amount paid. Following are the reasons in California that might support a change:

  • Reduced ability of the paying party’s ability to pay;
  • Reduced need of the party receiving the support;
  • The failure of the party receiving support to attempt to become self-supporting;
  • The remarriage, cohabitation, or death of the party receiving support; and
  • The inability of your employer or the child support agency to deliver the spousal support for at least six months due to a change in the payee’s address.

As you might imagine, how the facts are presented in a spousal support modification request can make a substantial difference in the outcome. If you’re faced with requesting modification or defending against it, you should hire an aggressive attorney with substantial experience in support matters. Judy L. Burger and her team have considerable experience in contested family law matters. Submit our Contact form today or call (415) 259-6636 to arrange an appointment to begin discussing your case.
The Mechanics of Business Valuation in California Divorces
California Divorce, Spousal Support

The Mechanics of Business Valuation in California Divorces

In California, the assets of a married couple seeking divorce must be distributed on an equal basis to the extent they were accumulated during the period of marriage. These assets are known as community property. Sometimes, however, one party owns or has an interest in a business that preexists the marriage. That interest is considered separate property.

Even though a business interest may be considered separate property, part of any appreciation in value that occurred during the marriage may be allocated to community property. In order for that to occur, a value must be established for the business. This is a very complicated task that is performed by a variety of professionals such as business appraisers, certified public accountants, economists, and financial analysts.  

Business valuations normally use one of two methods, depending on the nature of the business. These two approaches were established in case law in the beginning of the 20th century and still stand today. Pereira v. Pereira, decided by the Supreme Court of California in 1909, and Van Camp v. Van Camp, decided by the Court in 1921, set the course for allocation of business value to community property.

The difference between the two approaches hinges on the participation of the owning spouse in the operation of the business. Under Pereira, if that spouse was an active operator or manager of the business, appreciation in its market value during the marriage is likely to be considered community property. This is often the case with professional services such as legal or dental practices, as well as with small contractors or retail businesses.

On the other hand, the Van Camp method usually applies if the business was of such a size and structure that the owning spouse did not expend personal effort affecting its income and growth. In that case, appreciation is less likely to be included in community property and subject to equal division. Any amount included would be based on an assessment of the owning spouse’s compensation from the business during the marriage, as well as whether that compensation sufficiently contributed to the accumulation of other community property. This approach would be appropriate for larger manufacturing, contracting, or technology businesses.

The methods of business valuation are complex, and they vary depending on the type of business involved. At a basic level, valuation involves establishing how much a business is worth at the time of marriage and at the time of divorce or separation. The difference in the two values is then considered in light of proper method noted above. Courts will generally accept a business valuation method as long as the evidence on the record legitimately supports the value.

As you might imagine, the value of a business and how it is allocated to marital assets can make a substantial difference in a what both spousal and support orders. If your marriage involves a business interest, you should hire an attorney with substantial experience in complicated divorce cases, especially those involving the valuation of business assets. Judy L. Burger and her team have considerable experience in contested family law matters, and Judy is well-versed in business matters. Submit our Contact form today or call (415) 259-6636 to arrange an appointment.

How Is the Goodwill of a Business Valued in a California Divorce or Legal Separation?
Child Support, Spousal Support

How Is the Goodwill of a Business Valued in a California Divorce or Legal Separation?

The short answer to this question is that the goodwill of a business may be valued in any way the appraiser chooses. The longer answer is that the business appraiser may use any method that does not include impermissible values and that does include values that can be legitimately deduced from past results.

The goodwill value of a business is something that does not show up on the balance sheet. It is often an intangible aspect of the business that ultimately affects the bottom line. California Business & Professional Code defines goodwill in this way: “The ‘good will’ of a business is the expectation of continued public patronage”. It has also been described as a value that is different than capital stock or property of the business.

There are many different types of business that are valued in divorce cases, and, consequently, there are many different aspects to be considered by business appraisers when it comes to a goodwill value. Among the considerations are the following:

  • A regular and devoted customer base;
  • Reputation;
  • The length of time in business;
  • The likelihood that the business will continue in the future as in the past; and
  • The age of the spouse operating the business.

One of the prevalent methods of valuing goodwill is the Excess Earnings Method, which compares the business owner spouse to an employee of comparable experience in the same field. The method then factors in financial details from the performance of the business over a period of time to arrive at a value. The complexity of the method prevents discussion in this forum, but the salient point is that the method uses concrete financial information to arrive at a goodwill valuation.

Another method that has passed judicial muster is the Foster Method, which also uses a comparable salary coupled with financial data of the business. The common thread of these two methods that makes them acceptable to courts is that they are rooted in past performance of the business, and also take into account the likelihood of continued similar results.

The valuation of business goodwill also follows other basic tenets of divorce law. For example, business performance after the parties’ separation may not be used. Similarly, business profitability occurring prior to the marriage of the parties may not be included.

The valuation of a business, that is subject to community property distribution in a divorce, particularly the goodwill component, is a very complicated matter. Its complexity naturally gives rise to intense
When Is a Receivership Used in California Divorce Proceedings?
California Divorce, Spousal Support

When Is a Receivership Used in California Divorce Proceedings?

Have you ever wondered what can be done when one spouse threatens to hide or get rid of property during divorce or legal separation proceedings? California law gives judges the power to appoint what is called a “receiver.” A receiver’s job is to find, take control of, manage, and preserve assets.

Any party may ask for a receiver to be appointed. However, receivers serve as officers of the court and must be neutral where the parties are concerned, favoring neither.

There are several reasons that a court might appoint a receiver in a family law case:

  • hiding or moving assets;
  • diminishing assets;
  • depleting assets; or
  • threatening to do any of the above.

By law, a court may impose a receivership to tend to a couple’s assets for the following purposes:

  • carrying a judgment into effect;
  • disposing of property according to the terms of a judgment;
  • preserving assets until they are all identified and divided by a court;
  • preserving assets pending an appeal; and
  • preserving assets for use in setting child support.

At bottom, receiverships are intended to prevent a party from squandering community assets to the detriment of the other party or the couple’s children.

For example, one of the major California cases relating to receiverships in family law is Quaglino v. Quaglino, 88 Cal. App. 3d 543 (1979). In Quaglino, the husband killed the wife, leaving two minor children and landing him in jail. The children’s guardian ad litem bought a lawsuit against the husband, seeking child support. The trial court appointed a receiver, and the husband appealed.

The appellate court affirmed. It rejected the husband’s argument that receivership was improper because no judgment had yet been entered. In so doing, the court specifically held that the trial court had the power to appoint a receiver due to the “great probability that [it] would soon make an order of support and that the defendant’s property was in fact needed as a source to provide payment.

Receiverships are set up to protect the parties’ assets pending the outcome of legal proceedings. Although they can be costly, they are sometimes necessary to preserve the status quo and to protect the parties and their children. If you need an aggressive family lawyer who isn’t stymied by the more complicated aspects of family law, call me today. I have an extensive background both in family law and in business: (415) 259-6636.

Vocational Evaluation: A Valuable Tool for Reentering the Workforce
California Divorce, Spousal Support

Vocational Evaluation: A Valuable Tool for Reentering the Workforce

Spousal or partner support is one of the most critical issues in a legal separation or divorce proceeding. Many factors are considered in determining the propriety and amount of permanent and long-term support orders. Some of those factors, such as earning capacity and ability to pay, are directly affected by the parties’ skills and opportunities to obtain gainful employment. Unfortunately, evidence bearing on issues such as these can be difficult to obtain, especially if a party is inclined not to work in an attempt to deflate his or her income.

Enter the vocational expert. The California Family Code gives family court judges the power to order parties to undergo an examination by a professional known as a vocational expert, referred to in the law as a vocational training counselor. The law requires that these professionals have several minimum qualifications:

  • A master’s degree in a field of behavioral science;
  • The ability to assess career potential using inventories;
  • The ability to interview clients and assess their marketable skills;
  • Knowledge of factors relating to the geographic job market; and
  • Knowledge of the requirements of educational and training programs.                                              

Vocational experts need to know the mechanics of returning parties to gainful employment or to more lucrative employment. However, they should also be skilled at addressing human factors, such as the emotional and self-confidence issues that may arise due to being out of work for some period of time.

The mechanical portion of the vocational expert’s job consists of the following:

  • Evaluating the person’s skills, interests, and limitations;
  • Researching the labor market to determine opportunities and the likely earning potential of the party; and
  • Drafting a report summarizing these findings and making recommendations for how to help move the person in the direction of being self-supporting, if they are not already functioning at that level.

In addition to these functional tasks, the vocational evaluator can be helpful in easing the emotional burden on the person being evaluated, by explaining the process of imputing income and by helping to develop a career plan. The career plan may then be used by others, such as job coaches or career professionals, to achieve the goals of the evaluated party.

One of the outcomes of the vocational evaluation is that the evaluator can provide an opinion about the party’s earning capacity. This amount may then be imputed as income for the purpose of calculating spousal or partner support.

As you might imagine, the vocational expert report can have a significant impact on the support award in a case. You want an attorney with substantial experience in Northern California, who will represent you aggressively. Please contact the Law Offices of Judy Burger at (415) 259-6636 to learn more.

How Do California Courts Determine Spousal and Partner Support?
Spousal Support

How Do California Courts Determine Spousal Support and Partner Support?

Under California law, when a couple divorces or legally separates, a court can order spousal or partner support. Spousal or partner support can be ordered on a temporary basis, while the court case is pending. It can also be ordered by the court on a permanent basis at the end of the case, such as when a final divorce order is entered. Either way, a case must be pending before a court can become involved.

A court may enter a temporary support order to provide for support of a spouse or partner while the court case is pending. The factors used by California courts in determining the amount of a temporary order are set locally by court rule. For example, in San Francisco County, the local court rules provide that the Santa Clara schedule will be used to calculate the default amount of spousal support. However, the judge may decide, for reasons that constitute “good cause”, that a different amount is appropriate.

A court may also enter a permanent or long-term support order at the end of a case. California law mandates that many factors be considered by the judge in setting this award, including but not limited to the following:

  • The length of the marriage or partnership;
  • Each party’s age and health;
  • The Marital Standard of Living;
  • Each party’s debts and assets;
  • Each party’s needs;
  • Each party’s earning capacity;
  • The ability of the paying party to pay support;
  • The ability of the receiving party to work without adversely affecting the parties’ minor children;
  • The tax consequences to each party;
  • Whether one party helped the other to receive an education, a license, or a similar achievement; and
  • The occurrence of domestic violence between the parties or against their children.
The court must also consider “the goal that the supported party shall be self-supporting within a reasonable period of time”, as well as hardships presented to each party. It may also consider other matters that it considers are just and equitable to make a proper order of support.

As you might imagine, how these matters are presented to a court can make a significant difference in the support order. You want an attorney with substantial experience in Northern California who will represent you aggressively. Please contact The Law Offices of Judy L. Burger at (415) 259-6636 to learn more.