ÿWPCé r[ž·0¾0gývçVapÄé‰ç:ôìû@õ€–Ò€i•Å/` >¼›B®–u®zØmr¿”kÑÖø¾cžgOÖw!„ƒ÷í=tsÉ—˜Va©—b³K_:Ê‚]T•ÖOÞ°RH\ „{P{.0a¨a}×S'<öY(ª©ä°ÝÓ3Å-x+®H§I!l4óQá) ÅŠ¡‡:M•PœûücÀOb¤ x •ˆXò1èü ^L&Š§MI{‡¤YfV5æLòò„!ïYèSE KTî“a ƒžUnˆÅ׎vzw=ÕÃæPgõ#SîµÆrØÓ>E 9™hX,I~ÝF}q¸'uê¡ TDî3(ˆ«¥»8¼—èU ­öEK‘sòWšýâáíRÚI‘}õŒí&Eë^ȇý¥&Ù´a¿0`Y š—àkAÀš*½Ž\‹Q!V·ø‘ž¹˜5j+÷e?KóVú¦uP@-UIÝ.;ReSÕܹñž/{`*wwmNzrÉ<:“äQZb` Ãaæ¡=GGrxÂù´Ó ç¤ä$aZh ƒˆ‚ò{Uû¼ki ÷fà¡«9Ü_­•’äŽ ‚ßþ2(Z9%4v-‹c# jUNu %à 0(ÉUNñ B? w@\ 4œ ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° ° Æ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ ¿ 0P… … … … … … … … D3Õ AQ 0DY Y Y Y 0D ëá ̘HP LaserJet 4050 Series PCL6WINSPOOLÈÈ,,,,ÈÈ0 (@Ð Z 6Times New Roman RegularX($¡¡&a0® Z ‹6Times New Roman Regular d D U   b baDab8…f:ÿÔ¬$3|xƒLevel 1Level 2Level 3Level 4Level 5((3Þ¸$££Ý ƒ¤U!ÝÓ  ÓÝ  Ý'ÿÿdxd&\R`ZCþÿ<< Cÿÿ(3¯$¢¢Ý ƒ!ÝÝ  Ý($$””ò òÚ  Ú1Ú  Úó ó áÝ ƒ\¯"ÝÝ  ÝNote.€Do€not€enter€less€than€„0„€on€any€line.Ì1.à X àAlimony€paid€in€ò ò2nd€yearó ó........................................1.€òò€39,000€Ð éé Ðóó2.à X àAlimony€paid€in€ò ò3rd€yearó ó....................2.€òò€28,000€óóÐ ÕÕ Ð3.à X àFloor.....................................................3.€òò€15,000€óóÐ ÁÁ Ð4.à X àAdd€Lines€2€and€3.....................................................4.€òò€43,000€óóÐ ªª Ð5.à X àSubtract€Line€4€from€Line€1............................................................5.€òò€€€€„0„€€€€óóÐ ““ Ð6.à X àAlimony€paid€in€ò ò1st€yearó ó..........................................6.€òò€50,000€óóÐ || Ð7.à X àAdjusted€Alimony€paid€in€ò ò2nd€yearÐ hh Ðà X àó ó(Line€1€minusò ò€ó óLine€5)...........................7.€òò€39,000€óóÐ TT Ð8.à X àAlimony€paid€in€ò ò3rd€yearó ó....................8.€òò€28,000€óóÐ @@  Ð9.à X àAdd€Lines€7€and€8€...............................9.€òò€67,000€óóÐ , ,  Ð10.à X àDivide€Line€9€by€2..............................10.€òò€33,500€óóÐ    Ð11.à X àFloor....................................................11.€òò€15,000€€óóÐ þ þ  Ð12.à X àAdd€lines€10€and€11.................................................12.€òò€48,500€óóÐ ç ç  Ð13.à X àSubtract€Line€12€from€Line€6.........................................................13.€òò€€€1,500€óóÐ Ð Ð  Ð14.à X àRecaptured€Alimony.€€Add€Lines€5€and€13....................................14.€òò€€€1,500€óó Ý ƒ\¯"ÝÝ  ÝNote.€Do€not€enter€less€than€„0„€on€any€line.Ì1.à X àAlimony€paid€in€ò ò2nd€yearó ó........................................1.€òò€€€€€€€€€€€€€óóÐ éé Ð2.à X àAlimony€paid€in€ò ò3rd€yearó ó....................2.€òò€€€€€€€€€€€€€óóÐ ÕÕ Ð3.à X àFloor.....................................................3.€òò€15,000€óóÐ ÁÁ Ð4.à X àAdd€Lines€2€and€3.....................................................4.€òò€€€€€€€€€€€€€óóÐ ªª Ð5.à X àSubtract€Line€4€from€Line€1............................................................5.€òò€€€€„0„€€€€óóÐ ““ Ð6.à X àAlimony€paid€in€ò ò1st€yearó ó..........................................6.€òò€€€€€€€€€€€€€óóÐ || Ð7.à X àAdjusted€Alimony€paid€in€ò ò2nd€yearÐ hh Ðà X àó ó(Line€1€minusò ò€ó óLine€5)...........................7.€òò€€€€€€€€€€€€óóÐ TT Ð8.à X àAlimony€paid€in€ò ò3rd€yearó ó....................8.€òò€€€€€€€€€€€€€óóÐ @@  Ð9.à X àAdd€Lines€7€and€8€...............................9.€òò€€€€€€€€€€€€€óóÐ , ,  Ð10.à X àDivide€Line€9€by€2..............................10.€òò€€€€€€€€€€€€óóÐ    Ð11.à X àFloor....................................................11.€òò€15,000€€óóÐ þ þ  Ð12.à X àAdd€lines€10€and€11.................................................12.€òò€€€€€€€€€€€€óóÐ ç ç  Ð13.à X àSubtract€Line€12€from€Line€6.........................................................13.€òò€€€€€€€€€€€€€óóÐ Ð Ð  Ð14.à X àRecaptured€Alimony.€€Add€Lines€5€and€13....................................14.€òò€€€€€€€€€€€€€óóÝ ƒ!ÝÝ  ÝÑ8°ÑÑ8°ÑÒX°ÒÒX°ÒÔ‡x›–xXXÔÑ7€ŠŠXXdéXXdé7Ñà@IIìàFAMILY€&€DIVORCE€TAXATIONÔ#†XŠŠXxx›–S#ÔÔ‡XŠŠXXXŠŠÔÔ‡¼`R¼XXŠŠÔˆÐ 8 Ðà@==)ìàòòbyóóˆÐ P Ðà@w w ìàòòCurtis€L.€HarringtonˆÐ á© ÐÌà@¶¶ìàHARRINGTON€&€HARRINGTONˆÌÌà@m m ìàóóà@@q q (ìàòò6300€State€University€Drive,€Suite€250ˆÐ A  Ðà@½½ ìàLong€Beach,€CA€90815óóˆÐ ‚J  Ðà@¶ ¶ ìàòò(562)€594„9784,€Fax:€(562)€594„4414óóˆÐ Ë Ðà@}} ìàhttp:/www.patentax.com€€€€E„mail:€curt@patentax.com€€€€€€€PATENTAXòòòòððóóóóˆÐ Ì  ÐÌÌÌÌÔ#†XŠŠX¼¼`R#ÔÔ‡x›–xXXŠŠÔòòà@œœ*ìàAˆÐ T Ðóóà@7 7 %ìàòòPATENTAXòòðð€óóˆÐ …M Ðà@``$ìàPRESENTATIONóóˆÐ ¶!~ ÐÌÔ#†XŠŠXxx›–~#ÔÔ‡x›–xXXŠŠÔññññÌññññÔ#†XŠŠXxx›–e#ÔDisclaimer:€Educational€Only:€This€outline€is€Educational€Only€and€no€part€of€this€presentation€can€beÐ ÿ'Ç# Ðconsidered€as€federal€or€state€tax€advice,€opinion,€or€position€and€is€not€intended€or€written€to€be€used,€and€mayÏnot€be€used,€for€the€purpose€of€(i)€avoiding€tax„related€penalties€under€the€internal€revenue€Code€or€(ii)Ïpromoting,€marketing€or€recommending€to€another€party€any€tax„related€matters€addressed€herein,€nor€(iii)Ïconstituting€guidance€on€any€tax€or€intellectual€property€matter.Ô‡x›–xXXŠŠÔÐ  £+k' ÐÔ#†XŠŠXxx›–À#ÔÔ‡¼`R¼XXŠŠÔò òI.à ° àà  àSelected€Married€Tax€Rules€as€a€starting€point.ó óÐ 8 ÐÌà ° àA.à  àProperty€TransfersÐ Y! ÐÌà ° àà  à1.à0 ` àBecause€of€the€Community€Property€Presumption€(CA€Family€Code€ðð2581),Ð yA Ðproperty€transfers€are€considered€to€be€presumptively€within€the€communityÏproperty€umbrella€and€are€not€considered€to€be€a€transfer€but€rather€a€titleÏchange.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àThe€basis€of€property€will€be€the€community€basis€or€the€individual€basis,€asÐ É ‘  Ðinter„spousal€transfers€during€marriage€are€not€considered€transfers€andÏbecause€the€Internal€Revenue€Code€causes€the€taxpayers€to€be€ð ðrelatedðððð267Ïgenerally,€and€with€other€specific€provisions€ðð304€(redemption€of€stock)€&€Ïðð1239€(capital€gains)€.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àTacking€of€Ownership.€€Where€a€taxpayer€transfers€property€to€a€spouse€or€aÐ )ñ Ðformer€spouse,€period€of€ownership€of€the€transferee€shall€include€the€periodÏof€ownership€of€the€transferor.€€IRC€ðð121(d)(3)(A).€€Ownership€periods€areÏtypically€used€to€qualify€for€capital€gains,€but€periods€of€ownership€can€beÏused€for€other€purposes.Ð ` €%` €% ÐÌà ° àB.à  àSeparate€Property„Joint€Property€ApproachesÐ ‰Q ÐÌà ° àà0  à1.à0` €%€%àEven€where€spouses€remain€married,€and€where€tracing€can€be€applied,€theirÐ ©q Ðseparate€property€remains€separate€and€their€community€property€remainsÏcommunity,€with€any€property€not€being€traceable€being€presumed€to€beÏcommunity€property€under€CA€Family€Code€ðð2581.Ð ` €%` €% ÐÌà ° àà0  à2.à0` €%€%àWhere€separate€property€is€maintained€by€the€community,€or€whereÐ ù!Á Ðcommunity€property€is€maintained€by€using€separate€property€assets,€twoÏapproaches€are€utilized€to€determine,€on€a€pre„tax€basis.€€These€wereÐ ` €%` €% ÐÌà ° àà  àà ` à(a)à0 ¸ àA€ð ðPereiraðð€approach€is€to€allocate€a€return€on€the€separate€propertyÐ 9&"  Ðinvestment€as€separate€income€and€to€allocate€any€excess€to€theÏcommunity€property€as€arising€from€that€separate€property€ownerÏspouseððs€efforts.€Pereira€v.€Pereira€(1909)€156€Cal.€1,€7-8€103,€9€Pac.ÏRptr.€488,€491-492.Ð ¸ €%¸ €% ÐÐ ‰+Q'% Ðà ° àà  àà ` à(b)à0 ¸ à€A€€Van€Camp€approach€is€to€determine€the€reasonable€value€of€theÐ 8 Ðseparate€property€owner€spouseððs€services€and€to€allocate€that€amountÏas€community€property,€and€treat€the€balance€as€separate€propertyÏattributable€to€the€normal€earnings€of€the€separate€property€estate.€VanÏCamp€v.€Van€Camp€(1921)€53€Cal.App.€17,€199€Pac.Rptr.€885.Ð ¸ €%¸ €% ÐÌà ° àà0  à3.à0` €%€%àDuring€marriage€the€income€from€separate€property€assets€may€be€allocableÐ ˜ ` Ðto€the€owner€spouse€where€that€owner€spouse€files€ð ðmarried€filingÏseparatelyðð.€€Even€where€the€spouses€file€jointly€(thus€pooling€their€incomeÏto€make€no€distinction€between€separate€and€community€property)€spousesÏshould€keep€separate€asset€records€for€community€and€separate€property,Ïincluding€the€time€and€effort€and€cash€spent€on€each.€€Other€principles€turnÏon€the€separate€v.€community€character€of€property,€especially€where€aÏspouse€dies€intestate.Ð ` €%` €% ÐÌà ° àC.à  àGeneral€Sale€of€Residence€RulesÐ (ð ÐÌà ° àà  à1.à0 ` àSingle€individuals€exclude€no€more€than€$250,000€on€the€sale€of€theirÐ H Ðprincipal€residence,€while€married€couples€can€exclude€up€to€$500,000€€(IRCÏðð121)€if€several€tests€are€met:Ð ` €%` €% ÐÌà ° àà  àà ` à(a)à0 ¸ àTime€Ownership€&€Use€Test:€Owned€Property€and€used€it€as€principalÐ ˆP Ðresidence€for€two€years€of€the€five€years€immediately€preceding€theÏsale.€€The€two€year€use€need€not€be€consecutive€use€years.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àFrequency€of€Deduction:€The€exclusion€must€not€have€been€utilizedÐ È Ðwithin€two€years€prior€to€the€sale€in€question.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(c)à0 ¸ àIf€one€spouse€fails€in€the€Time€Ownership€&€Use€Test,€or€theÐ ø!À ÐFrequency€of€Deduction€€Test:€the€EXCLUSION€€will€be€limited€toÏthe€sum€of€the€exclusions€that€each€spouse€could€use€if€not€married.Ð ¸ €%¸ €% ÐÌà ° àà  à2.à0 ` àSpecial€rule€allows€a€surviving€spouse€to€have€a€$500,000€exclusion€insteadÐ 8&"  Ðof€the€$250,000€exclusion€for€single€taxpayers,ò ò€IF€the€surviving€spouseÐ H'#! Ðsells€within€2€years€of€the€death€of€their€former€spouseó ó.€This€is€forÐ \($$" Ðunmarried€persons€only,€a€re„marriage€will€cost€the€loss€of€this€deduction,Ïand€will€revert€to€the€rule€in€(c)€above€to€yield€a€single€$250,000€exclusion.Ð ` €%` €% ÐÐ +X'% Ðà ° àà  à3.à0 ` àRest€Home€Occupancy€periods€count€as€living€at€home€if€the€home€isÐ 8 Ðoccupied€at€least€one€year€during€the€five€year€period€prior€to€sale€of€theÏhome.Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àDestruction€of€the€Home:€if€the€taxpayersðð€insured€home€is€condemned€orÐ x@ Ðdestroyed,€the€insurance€reimbursement€payments€are€excludable€on€theÏsame€basis€that€gain€would€be€excluded.€€Any€excess€gain€may€possibly€beÏexcluded€under€the€involuntary€conversion€rules€under€IRC€ðð1033€generally.Ð ` €%` €% ÐÌà ° àD.à  àBankruptcyÐ È  ÐÌà ° àà  à1.à0 ` àBankruptcy€estate€can€includes€all€interests€of€the€debtors€spouse€even€whereÐ è°  Ðspouse€has€not€filed€nor€joined€the€debtorððs€bankruptcy€petition.€See€11ÏU.S.C.ðð541(a)(2).Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àSince€interest€in€property€is€determined€at€the€state€level,€DomesticÐ (ð ÐPartnership€Community€Property€is€included.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àBankruptcy€automatic€stay€under€11€U.S.C.€ðð362€(b)(2)€C€does€not€affectÐ X  Ðinterception/seizure€of€tax€refunds€to€satisfy€Domestic€Support€Orders€(andÏother€actions€including€establishment€of€paternity,€child€custody€orÏvisitation,€domestic€violence,€etc.)Ð ` €%` €% ÐÌà ° àE.à  àChild€CARE€Credits€(Not€to€be€confused€with€Exemptions€and€Child€Credit)Ð ¨p ÐÌà ° àà  à1.à0 ` àThis€non„refundable€credit€is€for€a€maximum€$3000€spent€per€qualifyingÐ È Ðindividual€(child€under€13€or€a€dependent€which€is€physically€or€mentallyÏincapable€of€caring€for€themselves„„€same€residence€as€taxpayer),€up€to€twoÏqualifying€individuals.€€They€lived€with€you€more€than€50%€of€the€year.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àQualifying€Expenses€include€(a)€dependent€care,€(b)€household€services,€(c)Ð $à Ðschool€costs€for€nursery/pre„school€(d)€some€special€school€expenses.€ÏQualifying€Expenses€are€limited€to€the€income€of€the€earned€income€of€theÏtaxpayer€or€spouse.€The€payments€for€care€cannot€be€paid€to€your€spouse,€toÏsomeone€you€can€claim€as€your€dependent€on€your€return,€or€to€your€childÏwho€is€under€age€19,€even€if€he€or€she€is€not€your€dependent.€You€mustÏidentify€the€care€provider€on€your€tax€return.Ð ` €%` €% ÐÐ ˆ+P'% Ðà ° àà  à3.à0 ` àCalculation€involves€multiplying€a€decimal€which€ranges€from€0.35€(for€AGIÐ 8 Ðunder€$15,000)€to€0.02€(for€AGI€over€$43,000)€times€the€money€òòactuallyÐ H Ðspentóó€on€qualifying€expenses.€€Multiplying€the€maximum€decimal€0.35€timesÐ X  Ðthe€maximum€expense€limit€per€child/dependent€of€$1050.00.€€Because€thisÏcredit€is€non„refundable€it€is€limited€to€being€no€more€than€the€tax€actuallyÏpaid.Ð ` €%` €% ÐÌà ° àF.à  àChild€Dependency€Exemption€&€Under€Age€17€Child€CreditÐ ¨ p ÐÌà ° àà  à1.à0 ` àThe€Dependency€Exemption€is€$3500.€€The€exemption€beginning€andÐ È  Ðendings€are:€Joint€$239,950„€$362,450;€Head€of€household€$199,950„¼$322,450;€€Single€$159,950„$282,450€&€Married€couples€filing€separatelyÏ$119,975„$181,225.€€Maximum€savings€with€an€exemption,€is€$3500€x€35%Ï=€$1225.00Ð ` €%` €% ЀÌà ° àà  à2.à0 ` àThe€Child€Tax€Credit€(under€17)€a€maximum€of€$1000.00€(non„refundable)Ð (ð ÐThis€credit€is€phased€out€by€$50€(of€or€subtracted€from€the€$1000)€for€everyÏ$1000€above€a€phase€out€threshold.€€Simple€math€indicated€that€there€are€20Ïsuch€$50€packets€within€the€$1000€credit€and€thus€the€range€above€theÏphaseout€threshold€is€$20,000€in€each€case.€€Beginning€phase€out€is:€JointÏ$110,000;€Single€Head€of€Household€and€Qualifying€Widow(er)€$75,000;Ïand€Married€Filing€Single€$55,000.€IRC€ðð24Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àThe€child€tax€credit€under€IRC€ðð24€is€limited€by€IRC€ðð€24(b)(3)(a)€to€taxÐ ¨p Ðimposed,€either€regular€or€AMT€tax.€€Further€IRC€ðð26,€limits€credits€underÏIRC€ðððð€23€(adoption€expenses),€24(child€credit€above),€25A(I)€(Hope€andÏLifetime€Learning€Credits),€25B€($2000€elective€IRA€deferrals),Ï25D(Residential€Energy€Efficient€Property),€30(Certain€Plug„In€electricÏvehicles),€30B(Alternative€Motor€Vehicle€Credit),€and€30€(D)€(NewÏQualified€Plug„In€Electric€Drive€Motor€Vehicles).Ð ` €%` €% Ðà ° àà  àà0 ` àMathematically,€the€IRS€is€limiting€each€category€individually,€and€then€allÏcategories€individually€over€regular€tax€liability€in€excess€of€AMT.€€Thus,Ïeven€if€a€taxpayer€had€$25,000€in€regular€tax€liability€and€$25,001€as€anÏAMT€tax€liability,€no€credits€of€any€kind€in€ðð26€would€be€available.Ð ` €%` €% ÐÌñ ñÌñ ññ ñÌñ ñÐ ˆ+P'% ÐòòII.à ° àóóò òà  àAlimonyÐ 8 Ðó óÌà ° àA.à0  àAlimony€is€distinguished€from€transfers€of€property€already€owned€at€the€time€ofÐ ‰Q Ðdivorce.Ð €%€% ÐÌà ° àB.à0  àAlimony€is€deductible€by€the€payor€former€spouse€(on€line€31a€of€form€1040)€andÐ ¹  Ðincluded€in€the€income€of€the€payee€former€spouse€(on€line€11€of€form€1040).€€SeeÏIRC€ðð71(b).Ð €%€% ÐÌà ° àC.à  àRequirements€of€AlimonyÐ ù Á  ÐÌà ° àà  à1.à0 ` àPayments€must€be€in€cash,€checks,€money€orders.€€Cash€payments€to€3rdÐ á  Ðparties€are€considered€alimony€is€contemplated€by€the€divorce€orders.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àPayments€must€be€required€by€degree€and€need€not€be€under€another€form€ofÐ I Ðobligation,€such€as€a€note.à  àÐY!` €%` €% ÐÌà ° àà  à3.à0 ` àInstrument€must€not€designate€the€payment€as€ð ðnot€alimonyðð.ÐyA` €%` €% ÐÌà ° àà  à4.à0 ` àPayor€and€Payee€former€spouses€must€NOT€be€members€of€the€sameÐ ™a Ðhousehold€if€separated€by€decree€or€order€of€separate€maintenance.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àPayment€may€not€be€treated€as€child€support€by€payee.ÐÉ‘` €%` €% ÐÌà ° àà  à6.à0 ` àPayorððs€requirement€to€make€this€stream€of€payment€must€cease€upon€theÐ é± Ðdeath€of€the€recipient/payee€former€spouse.Ð ` €%` €% ÐÌà ° àà  à7.à0 ` àThe€former€spouses€must€not€file€a€joint€return.Ð!á` €%` €% ÐÌà ° àà  à8.à ` àNon„cash€transfers€not€included.Ð 9# ÐÌà ° àà  à9.à0 ` àPayments€which€are€a€part€of€a€spouses€community€property€income€is€notÐ Y%!! Ðcounted€as€alimony.Ð ` €%` €% ÐÌà ° àà  à10.à0 ` àPayments€for€the€use€of€property€do€not€count€as€alimony.Љ(Q$"` €%` €% ÐÌà ° àà  à11.à0 ` àPayment€which€is€used€to€maintain€payors€or€payors€property€is€not€countedÐ ©*q&$ Ðas€alimony.й+'%` €%` €% Їà ° àD.à  àTax€Option€to€treat€alimony€as€ð ðnot€alimonyððÐ 8 ÐÌà ° àà  à1.à0 ` àWhere€divorce€decrees€permit€it,€the€former€spouses€may€agree€to€designateÐ X  Ðcertain€payments€as€ð ðnot€alimonyðð.€Temporary€Regulations€ðð1.71„1T(b)ÏQa8.Ð ` €%` €% ÐÌà ° àà  à2.à ` àPossible€purpose€for€treatment€as€ð ðnot€alimonyðð.Requirements€of€AlimonyÐ ˜ ` ÐÌà ° àà  àà ` à(a)à0 ¸ àPayor€former€spouse€as€no€gross€income€from€which€to€deductÐ ¸ € Ðalimony€and€wishes€to€save€the€payee€former€spouse€from€having€toÏinclude€it€as€income.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àPayee€former€spouse€has€a€significantly€higher€income€tax€bracketÐ øÀ  Ðthan€payor€spouse.€(Not€normal,€but€the€higher€bracket€may€be€due€toÏa€temporary€windfall,€etc.)Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(c)à0 ¸ àPayor€and€payee€wish€to€designate€a€payment€to€avoid€the€unexpectedÐ 8 Ðpossibility€of€invocation€of€the€alimony€recapture€rule.Ð ¸ €%¸ €% ÐÌÌòòIII.à ° àóóò òà  àAlimonyó ó€ò òRecaptureó óÐ x@ ÐÌà ° àA.à0  àBecause€Alimony€produces€such€a€severe€and€disparate€tax€effect€the€IRS€hasÐ É‘ Ðdeveloped€a€mechanical€test€to€determine€whether€there€is€ð ðexcess€alimonyððÏpayments.€If€ð ðexcess€alimonyðð€is€found,€according€to€the€formula,€the€transfer€isÏcharacterized€as€a€ð ðproperty€transferðð€(read:€inter„spousal€gift).Ð €%€% ÐÌà ° àB.à0  àThe€mathematics€of€the€recapture€formula€reveal€that€the€ð ðperfect€alimonyðð€shouldÐ !á Ðbe€a€flat€stream€of€cash€passing€from€the€payor€to€the€payee.€Ð €%€% ÐÌà ° àà  à1.à0 ` àStrategies€for€avoiding€recapture„€avoid€2nd€year€payments€that€exceed€3rdÐ I$  Ðyear€payments€by€more€than€$15,000,€and€first€year€payments€that€exceedÏsecond€year€payments€by€more€than€$7500.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àAvoid€an€alimony€payment€schedule€that€leaves€little€or€no€alimony€payableÐ ‰(Q$" Ðin€the€third€year€Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àStart€payments€late€in€the€year€(November€or€December).й+'%` €%` €% ЇÌà ° àà  à4.à0 ` àEven€if€payments€are€scheduled€to€avoid€alimony€recapture€it€can€still€occurÐ H Ðbecause€computations€are€based€actual€payments€rather€than€scheduledÏpayments€alone.€€As€an€example€of€this€„€spouse€paying€alimony€is€alsoÏobligated€to€pay€the€ex„spouseððs€attorneyððs€fees€and€these€are€thenÏcharacterized€as€alimony.€Since€ALL€payments€qualifying€as€alimony€duringÏthe€three€year€period€are€subject€to€recapture,€a€large€attorneyððs€fee€deductedÏas€alimony€could€trigger€recapture.Ð ` €%` €% ÐÌà ° àC..à0  àMechanicalð ðTransferorðð€must€provide€basis€and€holding€period€of€the€property€toÐ È  Ðthe€receiving€spouse€upon€transfer.€(No€real€penalty€for€failure,€except€for€naggingÏquestions€by€the€transferee€when€its€time€to€sell€the€property).Ð €%€% ÐÌà ° àD.à  àSpecifics€of€the€recapture€method:Ð Ð  ÐÌà ° àà  à1.à0 ` àA€three€year€period€is€necessary€to€begin€the€calculation€with€the€first€yearÐ (ð Ðbeing€the€year€in€which€alimony€payments€are€made€under€a€final€divorce€orÏwritten€separation€agreement.€€IRC€ðð71(f)(1).Ð ` €%` €% ÐÌà ° àà  à2.€à ` àAs€stated€in€the€statute,€Excess€Alimony€is:Ð h0 ÐÌà ° àà  àà ` à(a)à0 ¸ àThe€amount€of€alimony€during€the€first€post€separation€year,€Over€theÐ ˆP Ðsum€of€the€average€of€2nd€year€alimony€over€excess€payments€for€theÏ2nd€alimony€year;€averaged€with€(the€alimony€paid€in€the€3rd€year€+Ï$15,000).Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àWhere€the€Excess€Payments€for€the€2nd€post€separation€year€needed€inÐ Ø  Ðpart€(a)€is:€The€amount€of€the€alimony€in€the€2nd€year€over€the€sum€ofÏ(the€amount€of€alimony€in€the€3rd€year)€plus€$15,000.Ð ¸ €%¸ €% ÐÌà ° àà  à3.€à ` àExamples.Ð $à ÐÌà ° àà  àà ` à(a)€à0 ¸ àOn€the€next€page,€the€first€example€is€given€by€the€IRS,€in€which€firstÐ 8&"  Ðyear€alimony€is€$50,000,€second€year€alimony€is€$39,000€and€thirdÏyear€alimony€is€$28,000.€€Now€as€a€strict€construct€assuming€that€theÏthird€year€went€on€forever,€it€would€be€seen€that€year€1€might€haveÏhad€$22,000€recapture€and€year€2€might€have€had€$11,000€recapture,Ïbut€the€formula€is€more€forgiving.€€Out€of€the€potential€$33,000€ofÐ ˆ+P'% Ðalimony€in€years€1€and€2€which€was€€above€an€assumed€constant€rateÏof€alimony€of€$28,000€in€year€3,€the€recapture€equations€onlyÏrecaptured€$1,500,€Seemingly€very€forgiving.€€€All€family€lawÏattorneys€should€keep€a€pad€of€this€worksheet€in€order€to€test€alimonyÏpayments.€€So€long€as€the€actual€amounts€reported€and€paid€result€inÏzero€recapture,€it€shouldnððt€be€a€problem.Ð ¸ €%¸ €% ÐÌñ ñßk€[a7'#`|}ýR p€E«« RŠttj¢ãã âkßâ XãXãX€%X€%âñ ñÌÔ#†XŠŠX¼¼`R#Ôñ ñßk€[a7'#`|«úýÿR p€EÙ¸ RŠttj¢¸ âRkßññÔ‡x[éxXXª´ÔÔ#†Xª´Xxx[é N#Ôñññ ñÔ‡¼`R¼XXŠŠÔÌÌÌÌÌÌÌÌÌÌÌÌÌÌÌÌâ X€%X€%XãXãâÌà ° àà  àà ` à(b)à0 ¸ àRe„running€the€numbers€in€worksheet€1€at€the€top€of€the€page€with€theÐ È ÐIRS€numbers,€and€assuming€that€the€$28,000€figure€was€the€ð ðrealðð€flatÏrate€alimony,€and€with€the€second€year€alimony€the€same€as€in€theÏexample,€with€a€first€year€alimony€rate€of€$1,500€less€than€$50,000,€orÏ$48,500€would€have€caused€zero€recapture.Ð ¸ €%¸ €% Ðà ° àà  àà ` àà0 ¸ à€Alternatively,€if€the€second€year€alimony€rose€from€$39,000€toÏbetween€$42,000€and€$43,000€the€result€would€have€also€been€zeroÏrecapture.Ð ¸ €%¸ €% Ðà ° àà  àà ` àà0 ¸ àHowever€note€that€the€difference€between€year€1€alimony€and€Year€2ÏÔ#†XŠŠX¼¼`R¢N#ÔÔ‡¼`R¼XXŠŠÔalimony€is€roughly€half€of€the€difference€between€year€1€alimony€andÐ X( $" Ðyear€3€alimony.€€The€formula€is€looking€to€have€a€smaller€differenceÏbetween€year€1€and€year€2€than€between€year€2€and€year€3.Ð ¸ €%¸ €% ÐÐ ˆ+P'% Ðà ° àà  à4.à0 ` àHelpful€Rule€of€Thumb?€€(But€always€consult€the€chart€to€be€sure).€BecauseÐ 8 Ðthe€worksheet€makes€a€separate€recapture€for€the€3rd€year€versus€2nd€yearÏand€a€separate€recapture€between€1st€year€and€(average€of€3rd€year„2ndÏyear),€the€$30,000€difference€needs€to€be€divided€with€about€one€third€of€itÏbetween€the€first€and€second€year€and€about€two€thirds€between€the€secondÏand€third€year.€€A€blank€worksheet€is€provided€for€your€convenience€at€theÏbottom€of€the€worksheet€page.€€Remember,€if€a€sum€on€the€worksheet€turnsÏout€to€be€less€than€zero,€simply€put€a€zero.€€A€blank€copy€is€provided€for€Ïyour€future€use.Ð ` €%` €% ÐÌÌÔ#†XŠŠX¼¼`RøQ#Ôñ ñÔ‡x[éxXXª´ÔÔ#†Xª´Xxx[éÁV#Ôßk€[b7'#`|«úýÿR p€EÙèRŠttj¢èâRkßñ ñÔ‡¼`R¼XXŠŠÔñ ñßk€[b7'#`|pýR p€EžêRŠttj¢ÖèâTkßâ XÖXÖX€%X€%âñ ñÌÌÌÌÌÌÌÌÌÌÌÌÌÌÌà ° à¼â X€%X€%XÖXÖâà ° àÌò òIV.à ° àà  àCarry€Forward€Itemsó óÐ ø!À Ðà0 ° àà0°€%°€%àWhen€couples€divorce€and€have€tax€carry€forward€items,€the€carry€forward€itemsÏmust€be€allocated€between€the€spouses.€Allocation€methods:Ð €%€% ÐÌà ° àA.à  àCapital€losses€„€based€upon€the€separate€capital€gains€and€losses€of€à Ð àà (# àÐ 9&"  Ðà ° àà  àeach€spouse.€Reg€1.1212„1(c)(iv)€ÌÌà ° àB.à0  àCharitable€contribution€„€ratio€of€what€separate€carry€forward€items€would€haveÐ i)1%# Ðbeen€id€the€spouses€had€filed€separate€returns€for€the€year€the€excess€contributionÏarose.€Reg.€1.170A„10(d)(4)(I)(b)Љ+Q'%€%€% Їà ° àC.à0  àNet€operating€loss€(NOL)€„€ratio€of€what€the€separate€NOL€carry€forward€itemsÐ 8 Ðwould€have€been€with€each€spouse€separately€computing€income€and€deductions.ÏReg€1.172„7(d)Ð €%€% Ðà ° àà  àà ` àÌà ° àD.à0  àSuspended€passive€activity€losses€„€treat€as€a€gift€and€the€suspended€PALS€of€theÐ x@ Ðtransferor€spouse€added€to€the€basis€passing€to€the€receiving€spouse.€IRS€MSSPÏGuide€on€Passive€Activity€Losses.€IRC€469(j)(6).€&€IRC€1041(b).Ð €%€% ÐÌà ° àE.à0  àSuspended€S€corporation€losses€„€Follow€the€stock€in€a€divorce€related€transfer€toÐ ¸ € Ðthe€other€spouse.€IRC€1366(d)(2).Ð €%€% ÐÌ€Ìò òV.à ° àà  àChild€Supportó óÐ øÀ  ÐÌà ° àA.à0  àChild€support€payments€are€NOT€alimony,€are€not€taxable€to€the€receiving€spouseÐ á Ðand€are€not€deductible€by€the€payer€[Temp.Reg.1.71„1T(c)].€Payments€are€childÏsupport€for€tax€purposes€if€they€are€either:Ð €%€% ÐÌà ° àà  à1.€à0 ` àdesignated€as€child€support€in€the€divorce€or€separation€agreement€(fixedÐ Y! Ðchild€support)€orÐ ` €%` €% Ðà ° àÌà ° àà  à2.à0 ` àdeemed€to€be€child€support.ЉQ` €%` €% ÐÌà ° àB.à0  àFixed€child€support€„€an€amount€designated€as€such,€specifically€for€a€child€only,€inÐ ©q Ðthe€divorce€or€separation€instrument.€The€payment€may€be€a€fixed€amount€or€aÏfixed€portion€(€for€example,€50%)€of€a€payment.Ð €%€% ÐÌà ° àC.à0  àDeemed€child€support€„€certain€payments€are€not€identified€in€a€divorce€orÐ é ± Ðsettlement€agreement€as€child€support€are€treated€as€such€for€tax€purposes€if€theÏinstrument€reduces€the€payment:à  àÐ #Ñ€%€% Ðà ° àà  àà ` àÌà ° àà  à1.à0 ` àdue€to€a€child€contingency€orÐ)%ñ ` €%` €% ÐÌà ° àà  à2.à0 ` àat€a€time€that€is€ð ðclearly€associatedðð€with€a€child€contingency.ÐI'#!` €%` €% ÐÌà ° àD.à0  àCalling€such€a€payment€ððalimonyðð€in€a€divorce€instrument€does€not€à Ð àà (# àà @(# àÐ i)1%# Ðchange€this€result.€Contingencies€related€to€a€child€include€reaching€18,€à (# àà @(# àà @(# à21€orÐ y*A&$ Ðlocal€age€of€majority,€or€the€childððs€death,€marriage,€completion€of€à Ð àà (# àà @(# àÐ ‰+Q'% Ðschool,€leaving€the€household,€reaching€a€specified€income€level€or€à Ð àà (# àà @(# àÐ 8 Ðbecoming€employed.€[Temp.Reg.1.71„1T(c)]Ð €%€% ÐÌà ° àE.à0  àClearly€associated€with€a€child€contingency€„€if€either€of€the€following€tests€is€met,Ð h0 Ðpayments€are€considered€to€be€clearly€associated€with€a€child€contingency€andÏtherefore€deemed€child€support€and€not€alimony:à È à[Temp.Reg.1.71„1T(c)]Ј P€%€% ÐÌà ° àà  à1.à0 ` àPayments€are€reduced€within€six€months€before€or€after€a€child€à Ð àà (# àà @(# àà @(# àÐ ¨ p Ðattains€age€18,€21€or€local€age€of€majority.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àThe€payer€has€more€than€one€child,€payments€are€reduced€more€à (# àà @(# àà @(# àà @(# àthanÐ Ø   Ðonce,€the€reductions€occur€within€a€year€of€the€same€age€for€each€child,€andÏthe€age€is€between€18€and€24,€inclusive.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àThe€presumption€that€payments€are€child€support€can€be€rebutted€by€showingÐ à Ðthe€reduction€in€payments€is€not€related€to€a€child€(òòShepherdóó,€TC€MemoÐ (ð Ð2000„174).Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àThe€presumption€could€also€be€rebutted€if,€for€example,€the€taxpayer€showedÐ X  Ðthe€payments€lasted€for€a€period€customarily€used€in€his€jurisdiction€forÏalimony,€such€a€half€the€length€of€the€marriage.€[Temp.Reg.1.71„1T(c)]Ð ` €%` €% ÐÌà ° àF.à0  àConverting€Alimony€to€Child€Support.И`€%€% ÐÌà ° àà  à1.à0 ` àNormally€this€is€not€a€result€desired,€but€it€may€be€forced€upon€the€payor€byÐ ¸€ ÐIRS€rule.€€It€is€presented€before€the€ð ðconverting€Child€Support€to€AlimonyððÏin€G€below€because€it€will€be€easier€to€understand€if€introduced€first.€€ThereÏare€two€rules€stated€in€the€temporary€regulations€where€alimony€ð ðwill€beÏtreated€as€supportðð€òòbecauseóó€the€payment€are€reduced€at€times€associated€withÐ ø!À Ðthe€time€that€a€child€turns€18,€21,€18„24€or€the€local€age€of€majority.Ð ` €%` €% ÐÌà ° àà  àà ` à(a)à0 ¸ àPayments€are€reduced€nor€more€than€six€months€before€or€after€theÐ (%ð  Ðchild€reaches€age€18,€age€21€or€the€local€age€of€majority.Ð ¸ €%¸ €% ÐÌà ° àà  àà0 ` à(b)à0¸ ` €%` €%àPayments€are€reduced€on€òòtwo€or€moreóó€occasions€that€occur€not€moreÐ X( $" Ðthan€one€year€before€or€one€year€after€a€different€child€attains€a€certainÏage€between€the€ages€of€18€and€24.Ð ¸ €%¸ €% ÐÐ ˆ+P'% Ðà ° àà  à2.à0 ` àThese€rules€appear€in€(Temp.€Reg.€ðð1.71„1T(c)Q„A18).€€It€is€stated€that€it€isÐ 8 Ðpossible€to€ð ðrebutðð€the€presumption€of€the€rule€where€a€payment€is€reducedÏwithin€this€period,€but€it€should€have€heavy€substantiation€and€be€reasonable.€ÏReductions€occurring€outside€this€period€will€not€receive€the€presumptionÏand€may€not€need€much€substantiation.€Ð ` €%` €% ÐÌà ° àG.à0  àConverting€Child€Support€to€Alimony„€any€reduction€of€an€otherwise€qualifyingÐ ˜ ` Ðalimony€payment€that€is€tied€to€a€child€contingency€will€be€deemed€to€be€childÏsupport€from€inception.€As€a€result,€a€desire€to€structure€an€agreement€wherebyÏchild€support€is€treated€as€alimony€has€limited€opportunities.Ð €%€% ÐÌà ° àà  à1.à0 ` àRenegotiate€the€alimony€level€ab€initio€well€before€a€6€month€birth€date€orÐ è°  Ðdo€it€during€child€contingency€which€occurs€outside€that€range€„€the€coupleÏcan€execute€a€further€divorce€settlement€agreement€that€recite€supportÏpayments€that€are€not€allocated€between€alimony€and€child€support€and€thatÏcontain€no€reduction€provisions€(òòLawtonóó,€TC€Memo€1999„243)Ð(ð` €%` €% ÐÌà ° àà  à2.à0 ` àThe€agreement€can€provide€that€the€amount€of€future€alimony€payments€willÐ H Ðbe€renegotiated€upon€the€happening€of€specified€contingencies€related€to€theÏchild.€(Since€no€reduction€amounts€are€specified€in€the€instrument,€the€theoryÏis€that€an€amount€of€deemed€child€support€cannot€be€determined,€and€a€re„¼negotiation€also€contemplates€an€alimony€increase).€This€approach€may€yieldÏfavorable€tax€results€„€alimony„€at€least€until€the€first€reduction€actually€takesÏplace.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àDangers€of€taking€the€re„negotiation€position.ÐÈ` €%` €% ÐÌà ° àà  àà ` à(a)à0 ¸ àthe€IRS€may€take€the€position€that€all€prior€payments€were€partiallyÐ è ° Ðchild€support€and€deny€deductions€claimed€for€all€prior€open€tax€years.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àA€requirement€to€periodically€renegotiate€the€amount€of€paymentsÐ $à Ðwith€an€adversary€may€foreclose€the€ability€to€effectively€re„negotiate.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(c)à0 ¸ àMake€adjustment€on€specified€dates€not€related€to€a€child,€such€asÐ H'#! Ðwhen€the€child€turns€21,€or€18,€etc.€The€parties€may€write€theÏreduction€clauses€with€specific€reduction€dates€that€do€not€violate€anyÏof€the€ð ðclearly€associatedðð€factors€previously€discussed.€The€dates€that€Ïchildren€turn€age€18,€21€or€the€local€age€of€majority€are€known€andÐ ˆ+P'% Ðeasily€avoided.€It€is€fairly€easy€to€estimate€when€each€child€will€reachÏthese€dates€and€to€time€any€re„negotiation€well€clear€of€these€dates.Ð ¸ €%¸ €% ÐÌÌò òVI.à ° àà  àProperty€Transfers€incident€to€Divorceó óÐ x@ ÐÌà ° àA.à0  àUnder€IRC€ðð1041(a)€property€passing€between€the€spouses€generates€no€gain€orÐ ™ a Ðloss.Ð €%€% ÐÌà ° àà  à1.à ` àIncludes€transfers€under€a€trust€for€their€benefit.Ð É ‘  ÐÌà ° àà  à2.à0 ` àTechnically€treated€as€a€gift€(ðð1041(b))€which€will€not€even€have€a€gift€taxÐ é±  Ðeffect€since€spouses€have€an€unlimited€gift€&€estate€tax€exemption.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àThe€basis€in€the€property€is€the€transferorððs€basis.€€Thus€it€covers€both€theÐ á Ðother€spouses€separate€property€with€a€basis€acquired€before€or€duringÏmarriage,€as€well€as€property€having€a€basis€by€acquisition€within€theÏCommunity.Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àTransfer€timing:€The€transfer€must€be€either€within€one€year€of€the€divorceÐ i1 ÐOR€the€transfer€must€be€shown€to€be€related€to€the€divorce€proceeding.Ï(Definition€of€ð ðincident€to€divorce)Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àTransfers€more€than€six€years€after€marriage€are€PRESUMED€to€beÐ ©q Ðunrelated€to€the€divorce€proceeding€/termination€action€of€the€marriage.Ð ` €%` €% ÐÌà ° àà  à6.à0 ` àð ðTransferorðð€must€provide€basis€and€holding€period€of€the€property€to€theÐ Ù¡ Ðreceiving€spouse€upon€transfer.€(No€real€penalty€for€failure,€except€forÏnagging€questions€by€the€transferee€when€its€time€to€sell€the€property).Ð ` €%` €% ÐÌà ° àà  à7.à0 ` àCash€ð ðbuy„outsðð€are€included€in€the€exception.€A€cash€payment€for€propertyÐ $á Ðis€essentially€a€gift€of€the€property€by€the€property€donor€spouse€to€theÏproperty€donee€spouse,€followed€by€a€gift€of€cash€from€the€cash€donorÏspouse€to€the€cash€donee€spouse.Ð ` €%` €% ÐÌà ° àB.à0  àExceptions€to€tax€free€treatment€under€IRC€ðð1041(a):Ði)1%#€%€% Ðà ° àÌà ° àà  à1.à0 ` àLoans€to€bring€in€a€time€payment€element€where€the€asset€retained€is€a€non„Ð ‰+Q'% Ðbusiness€asset€that€one€former€spouse€is€paying€off€to€the€other.Ð ` €%` €% Ðà ° àà  à2.à ` àProperty€is€transferred€to€a€non„resident€alien.Ð H ÐÌà ° àà  à3.à0 ` àProperty€subject€to€liabilities€in€excess€of€basis€is€transferred€to€a€spousesÐ h0 Ðtrust€(rule€against€liability€stripping).Ð ` €%` €% ÐÌÌò òVII.à ° àà  àClosely€Held€BusinessesÐ ¨ p ÐÌà ° àà  àó ó1.à0 ` àWhere€a€business€asset€has€a€low€basis,€and€it€is€sold€to€the€other€spouse€at€aÐ Ê ’  Ðprice€above€that€basis,€the€buying€spouse€takes€over€both€bases,€and€the€otherÏspouse€has€no€gain€on€the€sale.€€An€example€is€a€closely€held€corporationÏwhere€husbandððs€basis€is€$500€and€wifeððs€basis€is€$500,€and€where€husbandÏbuys€out€wife€for€$100,000.€€Wife€has€no€gain€on€the€transaction,€andÏhusbandððs€new€basis€in€the€business€is€$1000.00Ð ` €%` €% ÐÌò òà0 ° àó óà  à2.à0` °€%°€%àStock€redemption€can€be€tricky.€€Say€that€H€&€W€each€have€100€shares€inÐ : ÐCorp.€X,€and€that€H€&€W€have€no€money,€its€all€inside€the€corp.€X.€€Lets€sayÏW€and€H€have€a€basis€in€their€shares€of€$50,000€each.€€€H€wants€to€cash€out,Ïso€the€corporation€redeems€his€stock€to€the€corporation€for€$100,000,Ïcorporation€X€takes€his€shares€and€retires€them.€€W€now€owns€100%€of€theÏcorporation€with€her€remaining€100€shares.€€The€possibilities€are€(1)Ïtreatment€as€if€corp€issued€a€dividend€to€both,€followed€by€W€buying€HððsÏstock€(bad€tax€result),€(2)€gain€to€H€in€excess€of€the€$100,000€over€HððsÏ$50,000€basis,€(3)€if€possible€a€reduction€in€Wððs€basis€to€zero,€even€thoughÏshe€didnððt€receive€Hððs€stock€directly,€with€H€walking€away€with€no€tax.Ð ` €%` €% ÐÌà ° àà  àà0 ` àBecause€IRC€ðð1041€only€deals€with€transactions€solely€between€formerÏspouses,€the€result€may€depend€upon€who€gets€to€Tax€Court€first.€€ThereÏhave€been€ð ðwhipsawðð€results€in€which€H€walks€away€tax€free€and€theÏcorporation€will€have€paid€out€cash€without€declaring€a€dividend.€€If€oneÏformer€spouse€makes€their€case,€the€other€former€spouse€may€not€be€a€part€ofÏthe€case.€€€Treasury€regulations€section€1.1041„2€(a)€attempts€to€approachÏthis€problem€but€without€clear€direction.€€Subsection€(a)€states€that€ifÏredemption€occurs€without€triggering€a€ð ðdistributionðð€from€the€corporationÏunder€state€law,€then€the€transferor€spouse€walks€away€tax€free.€€However€ÏSubsection€(2)€of€Treasury€regulations€section€1.1041„2€(a)€states€thatÏgenerally€a€redemption€(in€our€example€by€H)€is€treated€as€if€first,€H€gave€hisÐ Š+R'% Ðstock€to€W,€second,€W€took€the€stock€and€handed€it€to€the€corporationÏcreating€a€redemption,€and€third,€that€any€property€received€by€H€due€to€theÏredemption€(H€is€the€non„redeeming€spouse,€mind€you)€is€deemed€to€haveÏbeen€distributed€to€W.€€This€means€that€W€pays€the€tax€due€to€HððsÏredemption.Ð ` €%` €% ÐÌÌò òVIII.à ° àà0  àStock€Options.ó ó€€Ð¨ p€%€% Ðà0 ° àà0°€%°€%àÐ €%€% Ðà0 ° àA.à0°€%°€%àSince€Under€IRC€ðð1041(a)€property€passing€between€the€spouses€generates€no€gainÐ Ì ”  Ðor€loss€and€because€basis€in€the€property€is€the€transferorððs€basis,€a€former€spouseÏwho€takes€an€option€and€who€subsequently€exercises€that€option€is€treated€asÏhaving€the€same€tax€treatment€as€would€have€been€experienced€had€the€option€beenÏexercised€during€marriage.€Ð €%€% ÐÌà0 ° àB.à0°€%°€%àThe€result€will€depend€upon€whether€an€83b€election€had€been€made€and€otherÐ ,ô Ðcircumstances.€€It€may€even€result€in€employment€income€to€such€non„employeeÏformer€spouse.€€See€Revenue€Ruling€2002„22.Ð €%€% ÐÌÌò òIX.à ° àà  àCommunity€Propertyó óÐ |D ÐÌà0 ° àA.à0°€%°€%àCommunity€Property€is€a€system€of€property€division€which€divides€equally€allÐ e Ðproperty€-€no€matter€in€whose€name€it€is€held€-€acquired€during€the€term€of€theÏmarriage,€excluding€inheritances€and€gifts€in€some€jurisdictions.Ð €%€% ÐÌà0 ° àB.à0°€%°€%àThere€are€nine€community€property€states:€Arizona,€California,€Idaho,€Louisiana,Рݥ ÐNevada,€New€Mexico,€Texas,€Washington€and€Wisconsin€(quasi-communityÏproperty).€In€these€jurisdictions€property€acquired€prior€to€the€marriage€stays€withÏthe€party€who€acquired€it.€Certain€jurisdictions€exclude€property€that€comes€intoÏthe€marriage€by€gift€and€inheritance.Ð €%€% ÐÌà0 ° àC.à0°€%°€%à€Some€community€property€states€allow€equitable€distribution€where€justice€isÐ =&"  Ðserved.€These€rules€vary€state€to€state€and€are€fraught€with€exceptions.€ForÏexample,€the€rule€in€Texas€in€1983€was€that€any€division€of€community€propertyÏdidnððt€need€justification€unless€it€tilted€excessively€far€in€one€spouses€favor,€andÏthen€justification€needed€to€be€given.€€The€California€rule€at€that€time€was€theÏopposite,€namely€that€the€division€had€to€be€equal€unless€reasons€for€deviatingÐ +U'% Ðfrom€100%€equal€were€articulated.Ð €%€% ÐÌò òX.à ° àà  àChild€Related€Tax€Breaks€Available€to€Both€Former€SpousesÐ X  ÐÌó óà ° àA.à  àChildððs€Itemized€medical€expenses.Ð zB ÐÌà ° àB.à  àEmployer€provided€health€care€or€accident€plan€for€a€child.Ð š b ÐÌà ° àC.à0  àMedical€Savings€Account€or€Health€Savings€Account€distributions€from€EitherÐ º ‚ Ðformer€spouse€for€a€child€or€children.Ð €%€% ÐÌò òXI.à ° à€à  àDependentððs€Tax€(Child€CARE€Credits,€Exemptions,€&€Child€Creditsó óÐ ê²  Ðà ° àà  à(Also€see€this€outline€Roman€numeral€I,€subsections€€E€&€F€above.)ÌÌà ° àA.à  àOptimizing€the€Tax€BenefitsÐ ã ÐÌà ° àà  à1.à0 ` àBecause€(1)€dependent€credits€have€such€a€low€resultant€dollar€amount,€andÐ ; Ð(2)€because€each€of€the€Child€CARE,€Exemptions,€&€Child€Credits€theÏUnder€Age€17€Child€Credit€are€computed€differently€and€with€differentÏphase€outs,€and€(3)€because€the€inclusive€income€profiles€of€the€formerÏspouses€undergoing€is€rarely€addressed,€there€is€not€much€written€on€tryingÏto€optimize€the€now€separated€spousesðð€tax€dollars.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` à€The€total€tax€savings€(or€maximum€government€tax€loss)€will€depend€uponÐ «s Ð(a)€the€incomes€of€the€now€divorced€spouses€(b)€the€amount€of€alimonyÏwhich€now€affects€those€incomes,€and€(c)€the€shifting€of€the€dependencyÏexemption.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àHowever,€the€Internal€Revenue€Code€has€in€the€past€allowed€the€dependencyÐ û!à Ðexemption€and€child€tax€credit€to€be€shifted€òòas€a€single€unitóó€to€theÐ  #Ó Ðnoncustodial€parent€when€a€child€receives€over€one„half€of€the€childððsÏsupport€during€the€calendar€year€from€the€childððs€parents€who€are€either€(I)Ïdivorced,€(ii)€legally€separated,€(iii)€separated€under€a€written€separationÏagreement,€or€(iv)€living€apart€at€all€times€during€the€last€six€months€of€theÏcalendar€year.€(See€IRS€form€8332)€A€child€must€be€in€the€custody€of€one€orÏboth€of€the€parents€for€more€than€50%€of€the€calendar€year.€€Where€theÏð ðspecial€rule€doesnððt€enable€joinder€of€€the€dependency€exemption€and€childÏtax€credit,€the€form€8332€will€be€effective€to€shift€the€dependency€exemptionÐ ‹+S'% Ðalone.Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àClearly€due€to€its€higher€limits,€the€dependency€exemption€is€worth€more€toÐ X  Ða€spouse€in€a€higher€tax€bracket.€€In€what€is€referred€to€as€a€typical€divorce€inÏwhich€alimony€is€present,€the€child€dependency€exemption€was€surrenderedÏto€the€parent€with€the€greatest€tax€savings€and€alimony€might€or€some€otherÏpart€of€the€settlement€was€adjusted€to€try€to€increase€overall€after€tax€cashÏflow€to€both€parties€(assuming€that€the€level€of€contentiousness€was€not€soÏhigh€as€to€inhibit€such€considerations).Ð ` €%` €% ÐÌÌà@……'ìàò òTable€Ió óˆÐ è°  Ðà@ÅÅìàTop€Bracket€Breakdown€of€Value€of€Exemptions€and€CreditsˆÌ€Ìò òFederalà  àà ` àà ¸ àMax€Dependency€Fedà  àà p àà È àà  àà x àà Ð àTotalÐ á ÐTax€Bracketà ` àà ¸ àTax€Saved€at€top€of€Bracketó óà p àò òChild€Creditó óà x àà Ð àValueÐ *ò Ðà ° àÌ15%(to€$43,650)€à ` àà ¸ àto€$525à h àà À àà  àà p à$1000à  àà x àà Ð à$1525Ð N Ð25%(to€$112,650)à ` àà ¸ àto€$€875à h àà À àà  àà p à$1000@$75kà x àà Ð à$1875„„€toÐ ^& Ðà ° àà  àà ` àà ¸ àà  àà h àà À àà  àà p àphased€out€@€$95kà Ð à„„€€€$875Ð n6 Ð28%(to€$182,400)à ` àà ¸ àto€$980€à h àà À àà  àà p à$0(phased€out)à x àà Ð à$980Ð ~F Ð33%(to€$357,700)à ` àà ¸ à$1155€to€total€phase€outà  àà p à$0€(phased€out)à x àà Ð à$1155€to€0Ð ŽV Ð35%(€over€$357,700)à ¸ à$0€Phased€outà À àà  àà p à$0€(phased€out)à x àà Ð à$0Ð žf ÐÌÌà ° àà  à5.à0 ` àWhat€Table€I€very€roughly€shows€is€that€as€between€a€non„custodial€parentРΖ Ðwith€high€income€and€a€low€income€custodial€parent,€that€the€differencesÏbetween€the€value€of€the€Value€of€Exemptions€and€Credits€is€not€huge.€€TheÏdifference€in€awarding€the€exemptions€and€credits€to€one€parent€over€theÏother€amounts€to€a€tax€savings€maximum€of€$1875,€HOWEVER€it€canððtÏnecessarily€be€said€that€exemptions€and€credits€in€the€hands€of€a€lowerÏincome€custodial€spouse€are€òòinsignificant.óó€€In€other€words,€havingÐ .%ö  Ðexemptions€and€credits€is€worth€more€than€not€having€them,€BUT€the€valueÏof€exemptions€and€credits€in€the€hands€of€the€higher€earning€spouse€is€notÏòòthatóó€much€MORE€valuable€than€remaining€in€the€hands€of€the€lower€earningÐ ^(&$" Ðspouse.€€The€driving€force€of€the€tax€bracket€driven€exemption€value€is€offsetÏby€the€much€higher€value€of€the€child€credit€for€much€lower€incomeÏtaxpayers.ÐŽ+V'%` €%` €% Їà ° àà0  à6.à0` €%€%àMore€bluntly,€the€maximum€combined€benefit€above€occurs€with€theÐ 8 Ðexemptions€and€credits€in€the€hands€of€a€$75,000€wage€earner€at€$1875.€ÏEven€where€the€other€spouse€earns€only€$20,000;€the€combined€exemptionsÏand€credits€are€worth€$1525€in€the€hands€of€such€lower€earning€spouse.€€ThisÏis€a€difference€of€$350.€€But€considering€the€higher€marginal€utility€value€ofÏmoney€for€a€custodial€low€wage€earner,€the€change€in€the€rules€governingÏsurrender€of€the€exemptions€and€credits€(below)€could€have€been€predicted.Ð ` €%` €% ÐÌà ° àB.à  àRevocation€of€the€Shifting€of€Exemptions€and€Credits€to€the€Non„custodial€spouseÐ ¸ € Ðà ° àà  à(New€Rules)ÌÌà ° àà  à1.à0 ` àRevocation€of€release€of€claim€to€an€exemption.€During€May€2009,€the€IRSÐ è°  Ðcreated€a€new€rule€and€altered€form€8332€to€allow€the€custodial€parent€toÏREVOKE€any€previously€made€Release€of€Claim€to€of€Exemption€(andÏCredit€where€Credit€flowed€with€it).€€Since€the€changes€to€the€rule€occurredÏin€2009,€and€since€revocation€is€effective€no€earlier€than€the€tax€yearÏbeginning€in€the€calendar€year€following€the€calendar€year€in€which€theÏcustodial€parent€provides,€or€makes€reasonable€efforts€to€provide,€theÏnoncustodial€parent€with€written€notice€of€the€revocation,€and€since€the€formÏheading€is€entitled€ð ðRevocation€of€Release€of€Claim€to€Exemption€forÏFUTURE€YEARS,€a€revocation€filed€in€2009€would€only€apply€to€a€€shiftÏthe€exemption€for€tax€year€2010€and€later.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àPost-1984€decree€or€agreement.€If€the€divorce€decree€or€separationÐ ¨p Ðagreement€went€into€effect€after€1984€and€ò òbefore€2009ó ó,€the€noncustodialÐ ¸€ Ðparent€can€still€attach€certain€pages€from€the€decree€or€agreement€instead€ofÏForm€8332.€For€any€decree€or€agreement€executed€after€2008,€Form€8332€orÏsimilar€form€must€be€used.€€Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àGiven€that€revocation€can€be€executed€and€filed€unilaterally,€there€may€be€aÐ  #Ô Ðlarge€number€to€be€processed€between€summer€2009€and€the€end€of€the€year.€ÏThe€form€makes€it€clear€that€the€rights€to€the€exemptions€and€credits€are€forÏthe€sole€determination€of€the€custodial€parent.€€There€is€not€and€will€notÏbelieved€to€be€any€method€of€contesting€this€unlimited€right,€unless€theÏsurrender€of€the€exemption€and€credits€was€part€of€the€divorce€decree.€€Ð ` €%` €% ÐÌÔ#†XŠŠX¼¼`RªV#ÔÔ‡¼`R¼XXŠŠÔà ° àà  à4.à ` àPractice€PointersÐ |*D&$ ÐÐ Œ+T'% Ðà ° àà  àà0 ` à(a)à0¸ ` €%` €%àKeep€in€mind€that€exemption€claims€are€federal€and€preemptive.€Ð 8 ÐCustodial€spouses€can€be€controlled€to€maintain€the€release€ofÏexemptions€and€credits€only€through€the€state€court€decree.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àThe€possibility€of€revocation€should€be€either€taken€as€a€fact€that€itÐ x@ Ðwill€occur,€or€a€contingency€placed€in€the€decree€to€offset€the€effect.€ÏHowever,€the€effect€has€been€shown€to€have€a€maximum€value€if€lostÏof€not€more€than€about€$1875€and€a€differential€value€in€one€formerÏspouses€hands€over€the€other€spouses€hands€of€about€$350.€€Thus€theÏspouse€ð ðbargainingðð€to€obtain€the€exemptions€and€credits€should€notÏascribe€much€value€to€it.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(c)à0 ¸ àHeuristically,€the€differential€value€makes€most€sense€when€theÐ øÀ  Ðcustodial€parent€is€a€very€low€marginal€earner,€and€where€theÏnoncustodial€parent€has€AGI€of€LESS€than€$75,000€so€as€to€beÏeligible€for€the€child€tax€credit.€€Most€of€the€other€cases€will€diminishÏan€already€small€exemption/credit.Ð ¸ €%¸ €% ÐÌÌò òXIIó ó.à ° àà  àò òEstimated€Payments/Withholdingsó óÐ h0 ÐÌà ° àA.à0  àIf€a€couple€divorces€after€making€joint€estimated€tax€payments€and€then€later€filesÐ ŒT Ðseparate€returns,€estimated€tax€payments€may€be€claimed€in€full€by€either€spouse€Ïor€divided€between€them€however€they€agree.€Ð €%€% ÐÌà ° àB.à0  àIf,€however,€they€are€unable€to€agree,€the€payments€are€allocated€between€based€onÐ Ì” Ðthe€allocable€shares€of€their€combined€income€and€Self„Employment€(SE)€tax€forÏthe€year.€[Reg.€1.6654„2(e)(5)]Ð €%€% ÐÌà ° àC.à0  àThen€each€spouse€claims€estimated€tax€payments€equal€to€the€total€estimated€taxÐ  #Ô Ðtimes€the€tax€paid€on€their€separate€return€for€the€year,€divided€by€the€total€of€theÏtax€shown€on€both€former€spouseððs€separate€returns.à  àÐ,%ô €%€% ÐÌà ° àD.à0  àOverpayment€from€prior€return€„€when€overpayment€from€a€prior€joint€return€isÐ L'#! Ðapplied€to€the€following€yearððs€tax,€and€the€couple€divorces€during€that€year,€theÏoverpayment€credit€from€the€joint€return€is€treated€like€a€jointly€made€estimated€taxÏpayment€(CCA€200130036).€The€spouses€can€agree€to€divide€the€overpayment€inÏproportion€to€each€spouseððs€separate€tax€liability€in€the€current€year.€ÐŒ+T'%€%€% Ðà ° àà0  àExample:€Yoshihiro€and€Keiko€filed€a€joint€return€for€2008€with€joint€estimated€taxÏpayments€of€$18000.€Their€total€tax€for€2008€was€$16000€and€they€applied€theÏ$2000€overpayment€to€their€2009€tax€liability.€They€divorce€in€January€2009.ÏYoshihiro€and€Keiko€can€divide€the€$2000€overpayment€in€any€way€they€agree.€IfÏno€agreement€can€be€reached,€they€must€allocate€in€proportion€toò ò€ó ótheir€separate€taxÐ x@ Ðliabilities€for€2009.ò òÐŒ T€%€% ÐÌÌXIII.€à  àDivorce€Related€Sale€of€ResidenceÐ ¾ † ÐÌó óà ° àA.à0  àUnder€ðð121(d)(3)(A)€as€applied€to€real€property,€the€length€of€ownership€test€isРਠ Ðmet€by€a€transferee€spouses€use€of€the€transferor€spouses€time€of€ownership€test.Ð €%€% Ѐ€Ìà ° àB.à0  àUnder€impending€divorce€rules,€a€taxpayer€is€using€the€property€as€a€principalÐ Ø  Ðresidence€during€the€time€that€a€spouse€or€former€spouse€is€granted€the€use€of€theÏproperty€under€(a)€a€divorce€or€(b)€separation€instrument.€€Therefore,€absent€otherÏconsiderations,€where€the€home€is€going€to€be€sold€(and€in€particular€under€todayððsÏmarket€conditions€with€longer€sale€periods)€it€is€preferable€that€the€divorce€decreeÏstate€emphatically€that€both€spouses€have€the€right€to€live€at€the€residence.Ð €%€% ÐÌà ° àC.à0  àDestruction€of€the€Home:€result€is€the€same€for€Divorcing€Taxpayers€asÐ €H ÐDestruction€of€the€home€for€married€taxpayers.Ð €%€% ÐÌÌò òXIV.à ° à€à  àSeparate€PropertyÐ Àˆ ÐÌó óà ° àA.à0  àThe€California€Rule€„€income€from€separate€remains€separate€property,€while€otherР⪠Ðstates€hold€that€income€from€separate€property€is€community€property.€€This€willÏaffect€apportionment€of€taxation€from€income€produced€during€the€year€of€divorce,Ïboth€before€and€after€physical€separation.Ð €%€% ÐÌà ° àB.à0  àDivision€of€Community€Income€is€generally€taxed€equally€to€each€spouse.Ð2%ú €%€% ÐÌà ° àà  à1.à0 ` àHowever,€IRC€ðð66€provides€that€if€all€four€of€the€following€are€met,€that€theÐ R'#! Ðseparateness€of€such€community€property€will€be€governed€by€IRC€ðð879(a).€ÏNote€that€IRC€ðð879(a)€relates€to€non„resident€aliens€and€does€not€seemÏnatural€for€use€with€IRC€ðð66.€€The€four€numbered€ð ðtreatmentsðð€underÏsubsection€(a)€of€€IRC€ðð879€are€simply€ð ðread€intoðð€IRC€ðð66,€presumably€toÐ ’+Z'% Ðsave€paper.€€This€is€sometimes€known€as€the€ð ðliving€apartðð€rule.€€TheÏrequirement€are:Ð ` €%` €% ÐÌà ° àà  àà0 ` à(a)à0¸ ` €%` €%àThe€two€individuals€are€married€at€any€time€during€the€year;Ðh0¸ €%¸ €% ÐÌà ° àà  àà0 ` à(b)à0¸ ` €%` €%àLive€apart€and€did€not€file€a€joint€return€for€that€year;Ј P¸ €%¸ €% ÐÌà ° àà  àà0 ` à(c)à0¸ ` €%` €%àCommunity€income€was€earned€during€that€year;€andШ p¸ €%¸ €% ÐÌà ° àà  àà0 ` à(d)à0¸ ` €%` €%àNo€portion€of€such€income€was€transferred€between€the€two€before€theÐ È  Ðclose€of€that€year.Ð ¸ €%¸ €% ÐÌà ° àà  à2.à0 ` àThe€€four€numbered€ð ðtreatmentsðð€under€subsection€(a)€of€€IRC€ðð879€are:ÐøÀ ` €%` €% ÐÌà ° àà  àà ` à(a)à0 ¸ àIncome€other€than€trade€or€business€income€or€partnership€income,Ð à Ðshall€be€treated€as€income€of€the€spouse€who€rendered€personalÏservices.Ð ¸ €%¸ €% ÐÌà ° àà  àà0 ` à(b)à0¸ ` €%` €%àTrade€or€Business€income,€and€a€partnerððs€distributive€share€ofÐ X  Ðpartnership€income,€shall€be€treated€as€provided€in€IRC€ðð1402(a)(5).€ÏIRC€ðð1402(a)(5)(A)€states€that€a€community€business€income€andÏdeductions€belong€to€the€spouse€carrying€on€the€business,€but€if€bothÏspouses€carry€it€on,€the€apportionment€is€in€accord€with€theirÏrespective€share€of€gross€income.€IRC€ðð1402(a)(5)(B)€states€that€if€itsÏa€partnership€business,€that€all€of€that€partnerððs€share€is€used€toÏdetermine€the€partnerððs€net€earnings,€and€that€none€of€it€is€to€be€takenÏto€account€in€computing€the€net€earnings€from€self€employment€of€theÏspouse€of€such€partner.Ð ¸ €%¸ €% ÐÌà ° àà  àà0 ` à(c)à0¸ ` €%` €%àCommunity€income€from€separate€property€will€be€treated€as€theÐ #Ð Ðseparate€property€holderððs€property.Ð ¸ €%¸ €% ÐÌà ° àà  àà0 ` à(d)à0¸ ` €%` €%àAll€other€community€income€will€be€treated€as€provided€underÐ 8&"  Ðapplicable€community€property€law.Ð ¸ €%¸ €% ÐÌà ° àà  à3.à0 ` àIRS€can€ð ðdeny€the€benefits€of€any€community€property€lawðð€to€a€taxpayerÐ h)0%# Ðwho€acts€as€if€he€or€she€is€solely€entitled€to€such€community€income€andÏfailed€to€notify€that€personððs€spouse€before€the€due€date€for€filing€an€incomeÐ ˆ+P'% Ðtax€return.€€IRC€ðð66(b).Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àIRS€can€relieve€a€spouse€from€tax€liability€of€another€spouse,€including€IRCÐ X  Ððð66(c)€innocent€spouse,€Injured€spouse€[IRC€ðð€6402;€31€CFR€285.2(f)€&€(g);€ÏIRM€€25.15.1.2.5],€or€IRC€ðð6015€innocent€spouse.Ð ` €%` €% ÐÌÌò òXV.à ° àà  àRetirement€Accounts€€Division€&€QDROsÐ ¨ p ÐÌó óà ° àA.à0  àEmployer€Retirement€Plansò ò€„€ó ósubject€to€Qualified€Domestic€Relations€OrdersÐ Ê ’  Ð(QDRO).€€It€relates€to€the€rights€of€someone€other€than€a€participant€to€receiveÏbenefits€from€a€qualified€retirement€plan€(such€as€most€profit„sharing€and€pensionÏplans)€or€a€tax€sheltered€annuity.Ð €%€% Ðò òÌà ° àó óB.à0  àQualified€Domestic€Relations€Order€(QDRO)€Requirements.€€A€QDRO€is€aÐ ç Ðjudgment,€decree€or€court€order€(including€an€approved€property€settlementÏagreement)€issued€under€a€domestic€relations€law€[IRC€414(p)]€which€contains€theÏfollowing:ò òÐO€%€% Ðó óà ° àÌà ° àà  à1.à0 ` àName€and€last€address€of€participant(s)€(employee)€and€alternate€payeeÐ o7 Ð(former€spouse€diverting€portions€of€the€planððs€assets).Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àIdentity€of€the€retirement€plan€of€employer€or€employerððs€retirement€accountÐ Ÿg Ðto€which€the€QDRO€is€directed.ò òЯw` €%` €% ÐÌà ° àà  àó ó3.à ` àPercentages€of€each€benefit€type€to€be€paid€to€the€alternate€payee.РИ ÐÌà ° àà  à4.€à ` àTime€period€and€payment€amounts€to€be€diverted.ò òÐ ð ¸ Ðó óÌà ° àC.à0  àEffect:€In€some€cases€it€can€ð ðsplit€the€planððinto€two€plans€which€are€separatelyÐ #Ø Ðoperable,€but€not€always.€€In€some€cases,€the€alternate€payee€can€be€made€to€waitÏuntil€some€pre„determined€event,€in€order€to€begin€enjoying€cash€and€benefits.ò òÐ0%ø €%€% ÐÌó óà ° àD.à0  àThe€IRS€has€issued€a€notice€(Notice€97„11)€to€assist€domestic€relations€lawyers,Ð Q'#! Ðqualified€plan€participants€and€plan€administrators€if€drafting€and€reviewingÏqualified€domestic€relations€orders€(QDROS)€The€notice€consists€of€two€parts,€theÏfirst€covers€the€issues€that€should€be€considered€in€drafting€a€QDRO€and€the€secondÏpart€provides€examples€of€language€that€should€be€included€in€the€QDRO.Б+Y'%€%€% Їà ° àE.à  àERISA€limits€how€a€QDRO€can€affect€a€qualified€retirement€plan.Ð 8 ÐÌà ° àà  à1.à0 ` àA€QDRO€may€make€no€provision€to€cause€the€plan€to€increase€its€benefits.ÐX ` €%` €% ÐÌà ° àà  à2.à ` àAnother€QDRO€canððt€be€overridden€by€a€subsequent€QDRO.Ð x@ ÐÌà ° àà  à3.à0 ` àDifferent€benefits€or€options€not€provided€for€in€the€plan€cannot€be€required.Ð ˜ ` Ð(The€QDRO€must€be€consistent€with€the€terms€of€the€retirement€plan€toÏwhich€the€QDRO€applies.)ò òи €` €%` €% Ðó óÌà ° àF.à  àQDRO€Tax€EffectsÐ Ø   ÐÌà ° àà  à1.à0 ` àAmounts€paid€to€child€or€dependent€of€plan€participant€are€à Ð àà (# àà @(# àà @(# àà @(# àÐ øÀ  Ðtreated€as€having€been€paid€to€the€participant.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àSpouses€or€former€spouses€must€include€in€income€any€amounts€which€areÐ (ð Ðpaid€out.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àEarly€distribution€penalty€of€10%€does€not€apply€to€divisions€andÐ X  Ðdistributions€made€pursuant€to€a€valid€QDRO€which€is€consistent€with€theÏplan.Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àTo€qualify€as€a€QDRO€the€funds€must€be€distributed€to€the€spouse€directlyÐ ˜` Ðfrom€the€plan,€not€via€the€employee€accruing€benefits€under€the€plan.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àExample:€Wait€for€the€QDRO.€€In€the€Karem€case€„€[Karem,€100€TCÐ È Ð521(1993)]€a€taxpayer€awaiting€division€of€community€property€following€aÏdivorce,€received€lump„sum€distribution€from€a€retirement€plan€andÏdeposited€the€funds€into€a€trust€account€pending€the€courtððs€division€ofÏcommunity€property.ò ò€ó óYear€later„€court€issues€a€QDRO€authorizing€divisionÐ #Ð Ðof€the€funds.€IRS€held€&€the€Tax€Court€agreed:€payment€was€fully€taxable€toÏthe€original€participant,€as€it€was€not€made€under€a€QDRO€order.€Ð ` €%` €% ЀÌà ° àà  à6.à0 ` àRollovers€„€tax„free€distributions€of€cash€or€other€assets€from€one€retirementÐ L'#! Ðprogram€to€another.€A€distribution€received€by€a€plan€participantððs€spouse€orÏformer€spouse€under€a€QDRO€can€very€likely€be€rolled€over€tax„free€into€anÏIRA,€a€qualified€employer€retirement€plan€or€a€qualified€annuity€plan.ÏRollover€rules€apply€to€the€spouse€as€if€she€were€an€employee.ÐŒ+T'%` €%` €% Їà ° àà  à7.à0 ` à20%withholding€rule€may€make€direct€transfer€a€preferred€option€to€aÐ 8 Ðrollover€„€when€rolling€over€from€an€employerððs€plan€to€an€IRA.€IRCÏðð3405(c)(1)„€Employers€must€withhold€20%of€an€eligible€rolloverÏdistribution€„if€over€€$200„made€from€the€qualified€plans€to€the€employeeÐ ` €%` €% ÐÌà ° àà  à8..à0 ` àAlternatively,€if€the€balance€is€rolled€over€to€an€IRA,€an€under€age€59€ððÐ ˆ P Ðparticipant€can€receive€the€balance€in€the€IRA€as€a€à  àseries€of€substantiallyÐ ˜ ` Ðequal€payments€and€avoid€the€10%€early€withdrawal€penalty.Ð ` €%` €% ÐÌà ° àà  à9.à0 ` àBasis€is€allocated€„€if€the€alternate€payee€is€the€former€spouse€of€the€planÐ È  Ðparticipant,€any€basis€the€participant€has€in€the€plan€is€allocated€on€a€pro€rataÏbasis€between€the€present€value€of€the€alternate€payeeððs€interest€and€the€totalÏpresent€value€of€all€the€benefits€payable€with€respect€to€the€planÏparticipant.[IRC€72(m)(10)]Ð ` €%` €% ÐÌÌò òXVI.à ° àà  àIndividual€Retirement€Accounts€TransferÐ 8 Ðó óÌà ° àA.à  àIndividual€Retirement€Accounts€are€not€subject€to€Qualified€Domestic€à (# àÐ Y! Ðà ° àà  àRelations€Orders.ÌÌà ° àB.€Tax€Effects€of€TransferÌÌà ° àà  à1.à0 ` àIf€divorce€decree€or€separation€agreement€requires€a€transfer€to€a€spouse€orÐ ©q Ðformer€spouse,€such€transfer€is€not€considered€a€taxable€event€(decree€shouldÏstate€that€the€transfer€is€intended€to€be€tax„free€under€the€provisions€ofÏSection€408(d)(6).Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àAn€early€distribution€penalty€of€10%€may€apply€to€the€recipient€spouse€whoÐ ù!Á Ðmakes€a€withdrawal€before€the€age€of€59€ðð.Ð ` €%` €% Ðà ° àÌà ° àC.€Transfer€MethodsÌÌà ° àà  à1.à ` àChange€the€name€on€the€IRAÐ I'#! Ðà ° àà  àÌà ° àà  à2.à0 ` àDirect€trustee„to„trustee€transfer€of€IRA€assets.€€Caveat€divorceur:€If€fundsÐ i)1%# Ðare€not€directly€transferred€to€the€other€spouseððs€IRA€the€10%€penalty€mayÏbe€imposed.€Note€the€Bunney€case€[òòBunneyóó,€114€TC€259(2000)]€€„€husbandÐ ‰+Q'% Ðordered€by€divorce€court€to€evenly€divide€his€IRA€with€his€spouse.€RatherÏthan€directly€transferring€the€interest€in€the€IRA€to€the€spouse,€he€withdrewÏthe€money€and€gave€it€to€the€spouse.€Tax€court€holding:€husband€owed€taxÏplus€the€10%€early€withdrawal€penalty€on€the€distribution,€despite€taking€theÏdistribution€to€comply€with€his€divorce€decree.Ð ` €%` €% ÐÌÌò òXVII.à  àRegistered€Domestic€Partnersó óÐ ¨ p ÐÌà0 ° àA.à0°€%°€%à€Domestic€Partner€Rights€and€Responsibilities€Act€(DPRRA),€Family€Code€(F.C.).Ð É ‘  Ððð€297,€was€passed€in€1999.€€F.C.€ðð€297.5,€added€in€2003,€became€effective€JanuaryÏ1,€2005.€The€amendment€extended€to€registered€domestic€partners€(RDPs)€most€ofÏthe€rights€and€obligations€of€married€persons,€including€rights€with€regard€toÏcommunity€property€assets€and€liabilities€Domestic€Partner€Rights.€Therefore,Ïcommencing€with€the€date€of€their€registration,€RDPs€acquire€community€propertyÏlike€spouses,€and€their€creditors€have€recourse€to€both€RDPs€interests€in€suchÏproperty€to€the€same€extent€as€creditors€of€married€persons.Ð €%€% ÐÌà0 ° àB.à0°€%°€%àDefense€of€Marriage€Act€(ð ðDOMAðð).€For€purposes€of€federal€law,€ð ðspouseðð€refersÐY!€%€% Ðà0 ° àà0°€%°€%àonly€to€a€person€of€the€opposite€sex€who€is€a€husband€or€wife,€and€marriage€isÏlimited€to€opposite-sex€couples.€1€U.S.C.€ðð€7.€See€also€28€U.S.C.€ðð€1738C.Ð €%€% ÐÌà ° àC.à0  àComment.€€The€non„consistent€treatment€of€domestic€partners€under€the€federalÐ ™a Ðlaw€versus€California€Law€causes€a€number€of€problems.Ð €%€% ÐÌà ° àà  à1.à0 ` àDomestic€Partners,€two€people,€have€to€collectively€draft€five€tax€returns,Ð É‘ Ðincluding€(a)€a€joint€California€FTB€tax€return,€(b)€a€pair€of€theoreticalÏCalifornia€FTB€tax€returns€which€are€prepared€as€if€the€two€people€inÏquestion€were€single,€even€though€these€two€returns€are€never€filed,€and€(c)Ïthe€two€have€to€prepare€and€file€federal€tax€returns€based€upon€or€consistentÏwith€the€a€pair€of€theoretical€California€FTB€tax€returns,€for€a€total€of€fiveÏreturns.Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àThe€domestic€partnership€very€likely€is€a€partnership€relationship€which€willÐ I'#! Ðgenerally€force€attribution€under€IRC€ðð267€and€ðð318(a)€despite€exception€ofÏthe€word€ð ðspouseðð.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àInheritance,€and€Estate€and€gift€planning€remains€a€creative€exercise€as€theÐ ‰+Q'% Ðspousal€exclusion€is€not€available,€gift€splitting€is€not€available,€etc.Ð ` €%` €% ÐÌÌò òXVIII.à  àInnocent€Spouse€Relief€from€Joint€Tax€Liabilityó óÐ h0 ÐÌà ° àA.à  àRequirements:€for€IRC€ðð66(c)Ð ‰ Q ÐÌà ° àà  à1.à ` àJoint€return€was€NOT€filed€for€any€taxable€year.Ð © q ÐÌà ° àà  à2.à0 ` àSuch€individual€does€not€include€in€gross€income€for€such€taxable€year€anÐ É ‘  Ðitem€of€community€income€properly€includible€therein€which,€in€accordanceÏwith€the€rules€contained€in€section€879(a),€would€be€treated€as€the€income€ofÏthe€other€spouse.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àThe€individual€(seeking€relief)€establishes€that€he€or€she€did€not€know€of,Ð á Ðand€had€no€reason€to€know€of,€such€item€of€community€income,€andÐ ` €%` €% ÐÌà ° àà  à4.à0 ` àtaking€all€of€the€facts€and€circumstances€it€would€be€inequitable€€to€holdÐ I Ðsuch€item€of€community€income€in€such€individualððs€gross€income.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àIf€(a)€„€(d)€are€met,€the€item€of€income€is€included€in€the€gross€income€of€theÐ yA Ðother€spouse,Ð ` €%` €% ÐÌà ° àà  à6.à0 ` àFURTHER,€under€procedures€prescribed€by€the€Secretary,€if€,€taking€intoÐ ©q Ðaccount€all€the€facts€and€circumstances,€it€is€inequitable€to€hold€theÏindividual€liable€for€any€unpaid€tax€or€any€deficiency€(or€any€portion€ofÏeither)€attributable€to€any€item€for€which€relief€is€not€available€under€theÏpreceding€sentence,€the€Secretary€may€relieve€such€individual€of€suchÏliability.Ð ` €%` €% ÐÌà ° àB.à  àRequirements:€for€IRC€ðð6015(b)Ð $á ÐÌà ° àà  à1.à ` àJoint€return€was€filed€for€the€applicable€tax€year.Ð 9&"  ÐÌà ° àà  à2.à0 ` àThere€exists€the€understatement€of€tax€which€is€attributable€to€an€erroneousÐ Y(!$" Ðitem€(understated€income€or€overstated€deduction€„€usually)€of€the€otherÏspouse.Ð ` €%` €% ÐÐ ‰+Q'% Ðà ° àà  à3.à0 ` àThe€taxpayer€applying€for€innocent€spouse€status€neither€òòknewóó€nor€òòshouldÐ 8 Ðhave€knownóó€about€the€understatement€of€tax.ÐH` €%` €% ÐÌà ° àà  à4.à0 ` àtaking€all€of€the€facts€and€circumstances€it€would€be€inequitable€€to€hold€theÐ h0 Ðinnocent€spouse€liable€for€the€understatement.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àExtent€of€relief€from€tax€will€occur€to€the€extent€the€tax€deficiency€isÐ ˜ ` Ðapportionable€to€the€non„innocent€spouse.€ðð6015€(b)(2)Ð ` €%` €% ÐÌà ° àà  à6.à0 ` àBenefits€of€the€subsection€must€be€elected€not€later€than€2€years€from€theÐ È  Ðtime€that€collection€activities€have€begun.Ð ` €%` €% ÐÌà ° àC.à  àRequirements:€(for€IRC€ðð6015(c)€Separation€of€LiabilityÐ øÀ  ÐÌà ° àà  à1.à ` àJoint€return€was€filed€for€the€applicable€tax€year.Ð à Ðà ° àÌà0 ° à€à  à2.à0` °€%°€%àUnderstatement€of€tax€is€apportioned€between€the€innocent€spouse€and€theÐ 8 Ðnon„innocent€spouse.€€The€burden€of€proof€of€each€item€is€upon€the€innocentÏspouse.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àinnocent€taxpayer€must€(be€not€married€or€legally€separated)€or€(€must€or€notÐ x@ Ðhave€been€living€together€for€the€past€12€months).Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àExtent€of€relief€from€tax€will€occur€to€the€extent€the€tax€deficiency€isÐ ¨p Ðapportionable€to€the€non„innocent€spouse.€ðð6015€(c)(2)€and€burden€is€on€theÏinnocent€spouse€applicant.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àThe€taxpayer€applying€for€innocent€spouse€status€must€have€had€òòno€actualÐ è ° Ðknowledge€óóof€each€item€from€which€relief€is€soughtÐø!À` €%` €% ÐÌà ° àà  à6.à0 ` àBenefits€of€the€subsection€must€be€elected€not€later€than€2€years€from€theÐ $à Ðtime€that€collection€activities€have€begun.Ð ` €%` €% ÐÌà ° àà  à7.à ` àNo€credit€or€refund€under€section€(c).Ð H'#! ÐÌÌà ° àD.à  àRequirements:€(for€IRC€ðð6015(f)€Separation€of€LiabilityÐ x*@&$ ÐÐ ˆ+P'% Ðà ° àà  à1.à0 ` àThe€innocent€spouse€is€not€eligible€for€innocent€spouse€relief€under€IRCÐ 8 Ððð6015(b)€or€IRC€ðð6015(c).Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àIt€would€be€inequitable€to€hold€the€innocent€spouse€applicant€liable€for€anyÐ h0 Ðunpaid€tax€or€deficiency€(or€any€portion€of€either).€€Comment:€This€implies€aÏheightened€threshold,€in€that€the€innocent€spouse€should€show€a€level€ofÏrighteousness€(or€clean€hands)€to€the€extent€that€the€facts€should€show€noÏshades€of€entitlement€or€degrees€of€liability,€unlike€the€earlier€sections.€€InÏeffect,€this€section€is€a€ð ðcatch€allðð€section€which€purports€to€grant€relief€overÏthe€relief€denied€in€the€earlier€sections€(expected€due€to€technicalÏdifficulties).Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àAs€before,€but€even€more€so€in€this€section,€there€must€be€no€trace€of€fraudÐ øÀ  Ðor€illicit€transference€of€assets.Ð ` €%` €% ÐÌà ° àà  à4.à0 ` àIf€you€meet€this€exception,€the€IRS€will€consider€granting€equitable€relief,Ð (ð Ðalthough,€the€underpayment€may€be€attributable€in€part€or€in€full€to€yourÏitem,€and€only€to€the€extent€the€funds€intended€for€payment€were€taken€byÏyour€spouse,€or€former€spouse.Ð ` €%` €% ÐÌà ° àà  à5.à0 ` àThe€array€of€facts€which€can€assist€qualification€under€this€section€are€many,Ð x@ Ðand€might€for€example,€include€being€a€victim€of€abuse,€or€not€being€allowedÏinto€a€business,€or€where€the€spouses€had€separate€businesses,€and€the€like.€ÏAnything€which€forms€a€barrier€to€the€innocent€spouseððs€ability€to€see€intoÏthe€business€of€the€non„innocent€spouse,€should€be€emphasized.Ð ` €%` €% ÐÌà ° àE.à  àAction€under€for€IRC€ðð6015€generally.Ð Ø  ÐÌà ° àà  à1.à0 ` àRelief€for€innocent€spouse€may€be€raised€at€any€level€before€the€IRS,€butÐ ø!À Ðmore€importantly€may€be€raised€in€Tax€Court€under€IRC€ðð6015(e).Ð ` €%` €% ÐÌà ° àà  à2.à0 ` àEven€where€a€court€or€agency€finding€on€tax€liability€has€become€final€for€aÐ (%ð  Ðgiven€tax€year,€the€request€for€innocent€spouse€relief€can€still€be€made€soÏlong€as€a€request€for€innocent€spouse€relief€was€not€made€in€that€proceedingÏ(unless€the€innocent€spouse€applicant€meaningfully€participated€in€such€priorÏproceeding.Ð ` €%` €% ÐÌà ° àà  à3.à0 ` àNot€only€may€the€innocent€spouse€petition€the€Tax€Court€for€Review,€but€theÐ ˆ+P'% Ðnon„innocent€(other€)€spouse€can€answer€and€participate.€€Participation€mayÏinclude:€a€filing€for€a€request€for€innocent€spouse€(by€the€other€spouse),€orÏthe€promulgation€of€facts€and€evidence€so€that€the€court€will€deny€theÏoriginal€innocent€spouse€filing.Ð ` €%` €% ÐÌà ° àà  à4.à ` àTax€Court€Jurisdiction€is€limited€to:Ð ˆ P ÐÌà ° àà  àà0 ` à(a)à0¸ ` €%` €%àa€time€after€the€IRS€(Secretary)€has€mailed,€by€certified€or€registeredÐ ¨ p Ðmail,€€a€final€determination€(denying)€relief€under€innocent€spouse.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(b)à0 ¸ àa€time€which€is€6€months€after€the€date€the€request€for€innocent€spouseÐ Ø   Ðrelief€is€filed.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à(c)à0 ¸ àòòbut€not€later€than€90€days€after€the€IRS€(Secretary)€has€mailed,€byÐ Ð  Ðcertified€or€registered€mail,€€a€final€determination€(denying)€reliefÏunder€innocent€spouseóó.Ð(𸠀%¸ €% ÐÌà ° àà  àà ` à(d)à0 ¸ àInnocent€spouse€is€limited€to€income€taxes.€€Other€types€of€taxes€mayÐ H Ðbe€required€to€be€reported€on€the€joint€return€for€which€joint€liabilityÏattaches€but€for€which€innocent€spouse€relief€is€unavailable.Ð ¸ €%¸ €% ÐÌÌà ° àà  à5.à0 ` àSeparate€Liability€Election€using€Form€8857„€Injured€Spouse.€€This€isÐ ˜` Ðsimilar€to€Innocent€Spouse€(and€can€be€made€òòin€addition€toóó€the€innocentÐ ¨p Ðspouse€election).€€This€election€protects€the€electing€spouse€from€unpaid€taxÏliability€resulting€from€ð ðunderstatementðð€of€income.€Requires:Ð ` €%` €% ÐÌà ° àà  àà ` à1.à ¸ àJoint€return€was€filed.Ð è ° ÐÌà ° àà  àà ` à2.à0 ¸ àNot€married€or€legally€separated€from€joint€filer€at€the€time€theÐ #Ð Ðelection€was€filed.Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à3.à0 ¸ àNot€a€member€of€same€household€as€the€other€joint€filer€during€theÐ 8&"  Ðpast€12€months€(at€the€time€of€filing).Ð ¸ €%¸ €% ÐÌà ° àà  àà ` à4.à0 ¸ àIRS€can€properly€deny€the€relief€if€collusion€between€the€spouses€isÐ h)0%# Ðdiscovered.Ð ¸ €%¸ €% ÐÐ ˆ+P'% Їò òXVIX.à  àDeductibility€of€Attorneyððs€Feesó ó€€Ð 8 ÐÌà ° àA.à0  àDivorce€Attorneyððs€fees€are€generally€not€deductible,€regardless€of€which€partyÐ \$ Ðmust€pay€them€(such€as€where€one€party€is€ordered€to€pay€the€other€partyððs€attorneyÏfees).€€Only€if€they€are€properly€classifiable€as€ð ðalimonyðð€will€the€party€paying€theÏother€parties€divorce€attorneyððs€fees€be€deductible.Ð €%€% ÐÌà ° àB.à0  àTax€Attorneyððs€fees€are€deductible€ð ðbelow€the€floorðð€subject€to€the€2%€of€AdjustedÐ ¬ t ÐGross€Income€Floor€(meaning€that€the€deductible€portion€of€the€fees€is€that€portionÏabove€an€amount€which€is€2%€of€the€Taxpayersðð€adjusted€Gross€Income.)€€TaxÏAttorney€fees€which€are€deductible€are€those€related€to€general€tax€advice,€divorceÏtax€advice,€estate€tax€consequences€of€the€divorce,€appraisers€paid€to€determine€taxÏor€to€pursue€alimony.Ð €%€% ÐÌà ° àC.à0  àOther€non€deductible€costs€include€costs€and€fees€relating€to€child€custody,€childÐ ä Ðsupport,€and€property€settlement.€€Costs€and€fees€related€to€property€are€normallyÏadded€to€the€basis€of€the€property.Ð €%€% ÐÌà ° àD.à0  àPractice€Pointer:€This€section€points€out€how€very€important€it€is€to€have€aÐ \$ Ðcomplete€breakdown€of€the€fees€charged€by€divorce€attorneys.€€Fees€forÏdetermining€alimony€(like€hunting€for€hidden€assets€and€determining€prior€standardÏof€living€levels),€advice€given€for€tax€results€(explaining€the€tax€ramifications€ofÏdifferent€types€of€property€settlement),€and€fees€for€property€division,€especially€ifÏthey€may€be€either€actually€allocated€to€each€asset€or€even€allocated€based€uponÏsome€reasonable€basis€like€total€value€„€can€save€future€tax€dollars€where€theÏproperty€is€sold€„„€due€to€the€increased€basis€causing€a€lesser€profit.Ô#†XŠŠX¼¼`R͸#ÔÔ‡¼`R¼XXŠŠÔÐÌ”€%€% ÐÌ€€Ð  ì ´ Ðñ ññ ñÑh8Ññ ññ ññññ ñÑX8Ññ ñññññññÑÀ8ÑÑH8ÑññññññÌññÒ,XÒÒ,XÒñ ñÑð8Ññ ñññÑ,8ÑññññÑH8ÑññññññÑX8ÑññññññÑh8Ñññà@  ìàÔ#†XŠŠX¼¼`Rð-#ÔÔ‡Ü j ÜXXŠŠÔò òCurtis€L.€Harringtonó óˆÐ H ÐÒà,ÒÒà,ÒÔ#†XŠŠX ÜÜ j˜/#ÔÔ‡¼`R¼XXŠŠÔÓ¸ÞÓò òOfficeó ó:€à  àò òHarrington€&€Harringtonó ó;€6300€State€University€Drive,€€Suite€250,€€Long€Beach,€Ð ‡? Ðà 8 àà  àCA€90815;€€€Tel.€(562)€594„9784;€€Fax€(562)€594„4414Ìà 8 àà  àcurt@patentax.com€ò òPATENTAXòòððó óóóà   àà ø àhttp://www.patentax.comÐ c ÐÓff¸ÞÓÌò òÓšÙffÓSpecialtyó ó:à  àHigh€Technology€Patent€/€Trademark€/€Intellectual€Property€Law€&€TaxationÐ ¿w ÐÓffšÙÓÌÓšÙffÓò òEducationó ó:à  àò òB.S.€ó óChemistry€„€Auburn€University€(1974)Ð  Í Ðà 8 àà  àò òM.€S.€Electrical€Engineeringó 󀄀California€State€University€Long€Beach€(1990)Ð ÿ · Ðà 8 àà  àò òM.S.€Chemical€Engineeringó 󀄀Georgia€Institute€of€Technology€(1977)Ð é ¡  Ðà 8 àà  àò òJ.D.ó 󀄀University€of€Houston€School€of€Law€(1983)Ð Ó ‹  Ðà 8 àà  àò òM.B.A.ó 󀄀University€of€Oklahoma€(1985)Ð ½ u  Ðà 8 àà  àò òLL.M.€ó óòòTaxationó󀄀University€of€San€Diego€School€of€Law€(1997)Ð §_  ÐÓffšÙÓÌÓšÙffÓò òAdmittedó óà  àSupreme€Courts€of€California,€Arizona,€Texas,€&€NevadaÐ ýµ  Ðò òto€Practiceó ó:€U.S.€Supreme€Court;à ð àà H àU.S.€District€Court,€Central€District€of€CaliforniaÐ çŸ  Ðà 8 àà  àInternal€Revenue€Service€à H àU.S.€Patent€and€Trademark€OfficeРщ Ðà 8 àà  àU.S.€Court€of€Appeals€for€the€Federal,€Fifth€&€Ninth€CircuitsÌà 8 àà  àCalifornia€Department€of€Real€Estate€„€BrokerÌà 8 àà  àLos€Angeles€County€California€EMT„BasicÌà 8 àà  àU.S.€Tax€Courtà ˜ àà ð àà H àFCC„Commercial€&€Amateur€ExtraÐ m% Ðà 8 àà  àCertified€by€The€State€Bar€of€California€Board€of€Legal€Specialization:€TaxationÌÓffšÙÓÌÓšÙffÓò òLanguagesó óà0  àJapanese€Language€Proficiency€Examination,€Approved€by€Japan€Foundation,€LevelÐ §_ Ð4;€Kanji€Proficiency€Exam€of€the€Japan€Kanji€Aptitude€Testing€Foundation,€passedÏLevel€7,€recognized€by€the€Japan€Ministry€of€Education,€mastery€of€640€kanji;€someÏtechnical€Russian€reading€ability.Ð ø%ø% ÐÓffšÙÓÌÓšÙffÓò òPatentsó óà  àPrepared€and€prosecuted€more€than€100€patents,€in€the€electrical€andÐ ²j Ðò òPreparedó óà0  àchemical€technologies;€specialty€areas€include€optics,€fiber€optics,€cryogenicsÐ œT Ðelectromagnetics,€natural€gas€processing€and€computers,€&€trademark€and€copyrightÏpreparation€and€prosecution.€€Patents€include:€Chemical:€4,957,634;€4,851,077;ÏElectrical:€4,876,892;€4,833,351;€4,837,525;€Mechanical:€4,879,895;€4,906,199;€andÏOptical:€4,919,512;€4,898,468.Ð ø%ø% ÐÌò òLitigationó óà0  àAssociate€counsel€in€patent€matters,€trade€secret€litigation;€Judge€pro€tem,€LongÐ  "Á# ÐBeach€Municipal€Court;€Superior€Court€Mediation€program,€Long€Beach;€Attorney„¼Client€fee€Dispute€Arbitrator,€Long€Beach€Bar€Association;€Patent€Panel,€AmericanÏArbitration€Association.Ð ø%ø% ÐÓffšÙÓÌÓšÙffÓò òTeachingó óà0  àAdjunct€Law€Professor,€òòGolden€Gate€University€School€of€Lawóó,€LL.M.€TaxationÐ &Ì"( ÐProgram;€òòGeorgia€Institute€of€Technologyó󀄀previously€taught€heat€and€mass€transferÐ þ&¶#) Ðlaboratories,€and€analog€and€digital€computer€laboratory.Ð ø%ø% ÐÓffšÙÓÌÓšÙffÓò òMember:ó óà  àState€bars€of€California,€Arizona,€Texas€and€Nevada;€Long€Beach€Bar€AssociationÐ 8)ð%, Ðà0 8 àà08ø%8ø%à(Board€of€Governors,€1994„95);€Orange€County€Bar€Association,€Taxation€Section,Ï(Co„Chair€Technology€Law€Section€1996);€Past€Member,€Orange€County€Chapter€ofÏCalifornia€Society€of€Enrolled€Agents€„€President€2003„2004;€Fellow,€National€TaxÏPractice€Institute;€California€Bar€Association:€CEB€committee€(1999„2000);€IncomeÏ&€Other€Tax€subcommittee€(Chair€2000„2002);€Taxation€Section€ExecutiveÏCommittee€(2002„2005);€Cal€Bar€Taxation€Advisory€Committee€(2006„2011).Ô#†¼`R¼¼¼`R÷#ÔÔ#†XŠŠX¼¼`R&0#Ô