“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?

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.

Renewing a Family Law Judgment

A money judgment from a family law case does not expire. The judgment is active and valid until all monies have been paid in full. There are reasons, however, to have your family law money judgment renewed. Family law judgments accrue interest at the rate of 10% per year. For example, if you have a judgment for $20,000, the annual interest would be $2,000. After 5 years with no payments, the amount owed would be $30,000. If you were to have the judgment renewed, all of the money owed would become the new principle. In the example above then, the new principle is $30,000. So, the interest added each year thereafter would be $3,000 instead of $2,000. There is a filing fee, and you must renew the judgment within the first ten years after the date of the judgment. The debtor must be served with the new judgment and will have thirty days to file a motion to vacate or modify the renewal. If you received a judgment awarding you money in a family law case and have not received full payment, contact our office today. Judy L. Burger is known for aggressively representing clients in high conflict cases in and around the San Francisco Bay and Sacramento areas. Call today to learn more about how we can help at (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online using our confidential inquiry form.

What Are Your Options When A Former Spouse Refuses to Pay?

What are your optionsSometimes family law judgments are even harder to collect than regular debts because of the unpleasant emotions attached to the judgment in the mind of the payer. The anger and bitterness that develops during divorce or custody proceedings often continues, even after the court battle is over. If your former spouse or partner was ordered to pay money directly to you, his or her emotions can blur logic and lead to refusal to pay. If this situation is all too familiar to you, and your best efforts to work out payments have failed, then it is time for you to contact an aggressive family law attorney to help you collect. Clients frequently call on us for help to enforce payment of family law judgments. When we first meet with you, we will gather information about your case and explain your options.  Here are a few things we may recommend, depending on your circumstances:
  1. Using legal discovery methods to gain information about the former spouse’s assets. Before attempting to collect, we’ll need to know what assets he or she has that may be subject to levy or seizure.
  2. Placing a lien on the delinquent payer’s real estate.
  3. Placing a lien on the delinquent payer’s personal property.
  4. Seeking an Earnings Withholding Order to get part of the delinquent payer’s wages directly from his or her employer.
  5. Seeking to levy the delinquent payer’s bank accounts.
These are just a few of the options for collecting money owed on a family law judgment. If you are having difficulty getting your former spouse or partner to pay, contact our office today. Judy L. Burger is known for her tenacious representation of clients in highly contested family law cases in and around the San Francisco Bay and Sacramento areas.  If you need help enforcing a family law judgment, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.

Common Defenses Against Collection of Family Law Judgments

BrokeIf you are the debtor in a family law judgment case who needs to defend against a collection action, your attorney may choose from a variety of options in your defense. One of the tools used to defend collection by way of garnishment is a Claim of Exemption. Your attorney will prepare a document explaining why your wages should be excluded. Certain types of income and property are exempted from garnishment by law. After your attorney files your claim of exemption, the other party has ten days to oppose your claim. Similarly, you can claim an exemption on certain types of property if a judgment creditor is seeking to impose a levy on your real or personal property. The claim of exemption should be prepared by your attorney, who knows which types of income and property are excluded from being subject to a levy. If the other party submits a timely response to your claim of exemption, then the court will schedule a hearing and a judge will make the final decision regarding the exemptions. If you are facing garnishment or levy, or if you are seeking to collect money from a family law judgment, call our office today. Judy L. Burger is known for her aggressive representation of clients in and around the San Francisco Bay and Sacramento areas.  If you are dealing with either side of a family law judgment, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.

Collecting Money Owed to You from a Family Law Judgment

MoneyIf a former spouse or partner owes you money based on a judgment in a family law case, it is important for you to know that in California the collection of money from a family law judgment is the responsibility of the person to whom the money is owed. In other words, if you don’t take steps to enforce payment, the court won’t do it for you. You can begin collecting as soon as a money judgment is entered. Filing an appeal or a bankruptcy petition will not release the payer from the responsibility to pay judgments related to family support. If the responsible party fails to pay you on or before the court-ordered deadline, you should take steps to seek payment. Statistically, the longer a debt is owed, the harder it is to collect. Don’t waste precious time wondering whether you should do anything. If a court ordered your former spouse or partner to pay, then he or she should be required to do so. Most importantly you should contact an aggressive and caring family law attorney. The sooner you contact us, the sooner we can get started on a plan to collect the money you are owed. Judy L. Burger is known for her aggressive representation of clients in high conflict cases in and around the San Francisco Bay and Sacramento areas.  If you are having difficulty collecting a family law judgment, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916)631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.

What are California’s Rules for Spousal Support?

When is Spousal Support Allowed?
When is Spousal Support Allowed?
Spousal support, also known as alimony, is a payment made by one spouse to the other for support during or after legal separation or divorce.  A party can ask the court in his or her first filing to award temporary alimony to help the party meet expenses during the divorce. Similarly, a party seeking a domestic violence restraining order may also seek spousal support. A judge must consider certain factors before awarding spousal support, such as the ages of the parties, the standard of living of the parties during the marriage, the earning capacity of both parties, and the length of the marriage or domestic partnership.  Domestic violence committed by one party against the other may also be considered. Spousal support generally falls into one of two categories depending on the intended purpose of the alimony.  Rehabilitative alimony is intended to help a spouse get on his or her feet financially and usually is limited to a specific amount of time.  Permanent alimony may include monthly payments, lump sum payments, annuity payments, or trust payments.  Permanent alimony usually terminates upon the remarriage or romantic cohabitation of the receiving spouse or upon the death of either party. The Law Offices of Judy L. Burger can assist you in pursuing or defending a claim for spousal support.  Judy L. Burger is known for her aggressive representation of clients in high conflict cases in and around the San Francisco Bay and Sacramento areas. If you are in need of assistance regarding alimony, call us today to learn more about how we can help.  Call (415)293-8314 in the San Francisco Bay area or (916) 631-1935 in the Sacramento area, or contact us online via our confidential inquiry form.