Jerry Vanderhal v. Comm., TCS 2018-411
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
Alimony Requirement #4: Payment of Sallie Mae Loan of Ex-Spouse Not Alimony
Jerry Vanderhal divorced in 2011. The divorce agreement included a reference to a Sallie Mae student loan account that related to his former spouse. That reference was found in the “Division of Community Debts” section of the agreement and obligated Mr. Vanderhal to “assume and hold his former spouse harmless” from that debt. The agreement also included a section titled “Tax Free Transfers” that stated the parties believe and agree that the transfers of property between them required by the agreement were tax-free transfers of property between them and were therefore tax-free transfers of property made pursuant to §1041 and were not taxable sales or exchanges of property or payments for alimony, except where the agreement specifically denoted payments as such. On his 2013 tax return, Mr. Vanderhal claimed an alimony deduction for the payments he made on the Sallie Mae student loan. The alimony was disallowed because the payments did not fit within the definition of alimony. Instead, the payments constituted a division of property. Specifically, the divorce decree designated the payment as not allowable as a deduction under §215(b)(1)(B) (which was repealed in 2017])