Private Wealth Services Attorneys Stewart Kasner and Liam Crane reviewed significant legislative changes that affect deductibility and income taxation of alimony payments made to and received by former spouses. Made effective in 2019, these changes need to be considered in the 2020 tax year.
Withholding tax rules in which the former spouse receiving the alimony payments is a non-U.S. person and the payor spouse is a U.S. person have been affected. The rules are further complicated by the differences in how alimony is taxed in other countries, which can create double taxation unless a tax treaty exists and rectifies the whipsaw effect. Additionally, the division of property between former spouses, where either spouse is not a U.S. person, can trigger unanticipated income tax consequence and withholding tax exposures not often contemplated, particularly where the transfer of U.S. real property is involved.
Divorce in a Post-Tax Reform World with a Focus on Cross-Border Issues
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