At the start of Chapter 1, participants should identify the following topics for study:

* Marital status
* Joint return
* Separate returns
* Head of household
* Exemptions
* Divorce costs
* Withholding & estimated tax
* Community property states
* Ending the community
* Living together

1. List six severe tax implications to consider when going through a divorce, and clarify the requirements and effects of filing as married or unmarried.
2. Identify the requirements of filing a joint return and how to avoid being penalized.
3. Name the key elements of filing separate returns including what items to report and discern whether or not married taxpayers should file separate returns.
4. Clarify the requirements for filing as head of household and list the tax advantages and disadvantages of this filing status.
5. Explain the phaseout of exemptions pointing out its affects on taxpayers, identify when exemptions can be taken for spouses, and describe reporting requirements for dependent exemptions.
6. List and describe the requirements for pre-2005 dependency particularly relationship, married person, citizen or resident and income. Analyze the former regular and special method for determining support showing complications from back child support.
7. Define the current “qualified child” standard using residency, relationship, age, and joint return prohibition, and name three requirements that must be met for parents to treat a child as a qualifying child of a non-custodial parent.
8. Differentiate deductible and nondeductible divorce expenditures, determine which spouse is subject to tax imposed upon withheld wages, and explore the effects of making separate estimated tax payments or joint declarations of estimated tax.
9. Define community property listing the nine community property states, describe the effects of conversion and commingling of property and how to avoid such marital property issues.
10. Accurately report community income earned by married couples by:

a. Using three reporting guidelines, separating income earned and received into community property and separate property and ascertaining what income and property belongs to which spouse when they have different residency statuses;
b. Listing five requirements for the special community income allocation rules of §66(a) and clarifying community property termination and the treatment of alimony payments; and
c. Using former statements and records to provide estimates of a former spouse’s income and identifying four conditions for greater tax relief.

11. Discuss the effect of living together on filing statuses and dependency comparing the married tax rate with other tax rates, explain the tax consequences of having a living together contract to avoid tax traps, and clarify four results of Marvin v. Marvin.

       At the start of Chapter 2, participants should identify the following topics for study:

* Property rights
* Premarital agreements
* Application of §1031
* Incident to divorce
* Property basis
* Purchases of residence between spouses
* Purchases of business interests between spouses
* Selected asset divisions of residence & business interests
* Real & personal property
* Pension benefits

1. Name three forms of property identifying their likely division in marital property settlements and discuss five legal principles used in dividing assets and providing support on divorce or separation.
2. List the benefits of premarital agreements pointing out the requirements and permissible provisions for a valid and comprehensive agreement under the Uniform Premarital Act.
3. State the position of U.S. v. Davis on interspousal transfers pointing out the changes made by §1041, recite the requirements of §1041 and describe the scope of its application.
4. Explain two factors that determine whether a property transfer is incident to divorce and how to meet these factors or avoid §1041 altogether when desired.
5. Evaluate and question the application of §1041 to transfers in trust under §1041(e) and to third party transfers on behalf of a spouse or former spouse.
6. Determine any deferred tax liability by figuring property basis for the transferor spouse and transferee spouse under §1041 after a property settlement.
7. Apply §1041 to property transfers where the transferee assumes liabilities encumbering the property, and identify with appropriate records the holding period for an asset transferred between spouses or former spouses incident to divorce.
8. Identify the dangers of purchasing a former spouse's interest in property particularly a marital residence and its tendency to create deferred tax liability.
9. List three of the effects of purchasing an interest in personal or real property used in a business or held for investment, determine potential recapture and explain the use of an exchange to dispose of low-basis property received in a §1041 transfer.
10. Specify three common disposition alternatives available on divorce, discuss the home sale exclusion requirements, and analyze the tax treatment and use of installment obligations under §453 in divorce.
11. Compare and contrast sale, redemption, recapitalization, liquidation and third-party transfers as methods of dividing a business in a marital settlement citing unique provisions under §302, §736 and §754.
12. Identifying whether gain or loss on a sale of real or personal property is capital or ordinary, explain the tax treatment of such gain or loss and clarify the role and tax treatment of life insurance in property settlements.
13. Name four popular methods of dividing retirement benefits in a divorce or separation action giving particular attention to analyzing the requirements and tax consequences of a “qualified domestic relations order (QDRO).
14. Formulate an overall tax and economic strategy for the division of pension benefits in a marital settlement by:

a. Comparing the pros and cons of deferred, present, and alternate property division arguments;
b. Discussing the treatment of IRAs at divorce considering the IRA deduction limit and rollovers;
c. Listing six strategies for retirement planning after divorce;
d. Describing the Social Security benefits, military pensions, civil service pensions, or railroad pensions that may be available to a former spouse; and
e. Clarifying which debts incurred during a divorce are dischargeable in bankruptcy.

       At the start of Chapter 3, participants should identify the following topics for study:

* Divorce or separation instrument
* Alimony requirements of instruments executed after 1984
* Alimony requirements of instruments executed before 1984
* Deducting alimony paid & reporting alimony received
* Recapture of alimony for type A & B agreements
* Alimony substitution trusts & annuities
* Alimony paid by estate
* Child support
* COBRA coverage
* Qualified medical child support orders

1. Define “alimony” and “separate maintenance payments” under §71 and their deduction or income treatment under §215.
2. Delineate three types of §71 “divorce or separation instruments” and explain how having an invalid decree, an amended instrument, or a premarital agreement impacts such an instrument.
3. List seven variables that impact whether a payment is alimony since 1984 and determine whether a cash payment is deemed made to or on behalf of a former spouse in order to characterize it as alimony.
4. Explain the tax treatment of housing costs for the family residence pointing out the impact of ownership by contrasting when the nonoccupying spouse owns the home with when the occupying spouse owns the home.
5. Identify what rent or resident cost payments can be alimony when a family residence is jointly owned and occupied by a spouse or a taxpayer is required to make rent payments for a spouse.
6. Describe the tax treatment of life insurance premium payments, voluntary payments and payments to a remarried spouse noting advantages and disadvantages to each spouse.
7. Demonstrate how to recharacterize otherwise deductible alimony payments as nondeductible, determine whether spouses are members of different households, and warn as to the alimony pitfall of being required to make payments after a former spouse’s death.
8. Distinguish child support from alimony contrasting their tax treatment to avoid reporting errors.
9. Compare and contrast the alimony and child support tax provisions that currently apply with those that applied to instruments executed prior to 1985 by:

a. Listing the three pre-1985 alimony requirements, defining periodic payments and determining whether certain payments would have qualified under these rules; and
b. Explaining the marital or familial relationship and showing the similarities and differences in the treatment of child support under current law and previous law.

10. Deduct alimony paid and report alimony received on the proper forms and include required information when filing.
11. Describe the alimony recapture rule for various marital agreements and its impact on the tax treatment of past payments.
12. Analyze alimony trusts to realize tax advantage and security, explain the use of annuity contracts, and determine the proper tax treatment of alimony paid by an estate to a former spouse of a decedent.
13. Explain the tax treatment of child support, identify two circumstances where a payment will be fixed as child support, and list six events that determine whether a contingency is clearly child-related showing how to rebut this presumption of child support.
14. Advise clients on COBRA rules and qualified medical child support orders permitting them to make the most of health care coverage plans by:

a. Determining whether COBRA rules apply to different plans including notice & deadline requirements and listing four situations that may result in a termination of continuing coverage; and
b. Defining “qualified medical child support orders” comparing them to other similar orders and clarifying the procedures, requirements and jurisdiction of QMCSOs.

       At the start of Chapter 4, participants should identify the following topics for study:

* Marriage penalty
* Spousal travel
* Dower & curtsey
* Joint interests and powers of appointment
* Life insurance
* Marital deduction
* Tax basis for estate assets
* Business interests upon death of a spouse
* Gift taxes
* Social Security survivors’ benefits

1. Analyze the marriage penalty and marriage bonus associated with filing a joint return by:

a. Identifying how standard deductions and bracket breakpoints for some filers follow certain customary ratios; and
b. Discussing the effects that the 2001 EGTRRA and HR2 had on the standard deductions and bracket breakpoint for married filing jointly.

2. Clarify the tax treatment of spousal travel including additional cost limitations and explain the benefits of husband and wife partnerships particularly with regards to Social Security qualification.
3. Explain the application of federal estate tax to couples and where estate planning changes may be necessary as a result of marital status including the unique application of dower and curtsey.
4. Determine the treatment of co-tenancies with or without a right of survivorship identifying qualified joint interests, evaluate the impact on value of a general power of appointment, determine what insurance proceeds are included in the gross estate explaining incidents of ownership and describe the community property issue involved with ownership of life insurance.
5. Discuss the impact of the marital deduction on the gross estate listing six outright transfer methods and explain the use of “marital deduction (QTIP) trust” and a “qualified terminable interest trust” so that clients can take advantage of the marital deduction using other methods.
6. List six marital deduction variables are pointing out the deduction limitations and contrast the federal income tax treatment and gift tax treatment of non-citizen spouses.
7. Analyze the effect that common transactions and community property have on §1014 property basis and explain the benefits of a bypass trust demonstrating its effect on the marital deduction.
8. Give two purposes of the federal gift tax explaining its computational method including applicable exclusions, name the advantages of splitting gifts and the gift tax marital deduction providing warnings as to “excess” gifts and terminable trusts and determine Social Security eligibility for family members of a system participant.

CHAPTER 1 - Basic Marital Tax Matters

Filing Status

Marital Status

Unmarried

Abandoned Spouse Rule - §7703

Married

Joint Return

Citizenship

Liability

Innocent Spouse Exception

Refund Offset Program - §6402

Injured Spouse - Form 8379

Separate Returns

Itemized Deductions

Medical Expenses

Property Tax & Interest

State Income Taxes

Casualty Loss

Separate vs. Joint Dilemma

Disadvantages of a Separate Return

Advantages of a Separate Return

Joint Return after Separate Returns

Head of Household

Requirements

Considered Unmarried

Keeping Up a Home

Qualifying Person

Nonresident Alien Spouse

Exemptions

Phaseout of Exemptions

Personal Exemptions

Spouses

Former Spouse

Dependency Exemptions – Old & Current Rules

Five Pre-2005 Dependency Tests - The “Old Rules”

Test #1 - Relationship

Household Member

Test #2 - Income

Dependent Child Income Exception

Definition of a Child

Definition of a Student

Test #3 - Citizen or Resident

Test #4 – Married Person

Test #5 - Support

Regular Method

Joint Home Ownership

Special Support Method for Children of Divorced or Separated Parents

Custodial Parent

Noncustodial Parent

Back Child Support

Dependency Tests After 2004

Unified Definition of a Qualified Child

Four Dependency Tests

Test #1 - Residency (or Time) & Citizenship

Children of Divorced or Separated Parents

Test #2 - Relationship Test

Test #3 - Age Test

Test #4 - Joint Return Restriction

Medical Expenses

Child-Care Credit

Divorce Costs

Allocation of Costs & Fees

Tax Advice - §212(3)

Fees to Obtain Alimony or Protect Income - §212(1) & (2)

Fees to Obtain Property - §1012 & 1016

Nondeductible Expenses

Withholding & Estimated Tax

Joint Estimated Tax Payments

Refunds & Deficiencies

Nonresident Alien Spouse Withholding

Community Property

Community Property States

Transmutation

Commingling

Income Reporting

Spouses with Different Residency Statuses

Special Income Rules For Spouses Living Apart - §66(a) & §879

Mandatory Application

Earned Income

Trade or Business Income

Partnership Income or Loss

Separate Property Income

Social Security Benefits

Other Income

Denial of Community Property Reporting - §66(b)

Community Reporting Relief Provisions - §66(c)

Ending the Community

Annulment

Separation

Alimony vs. Community Income

Living Together

Married v. Unmarried Tax Rate Comparison

Sham Divorce

Dependency Exemptions

Attributable Income

Alimony & Property Divisions

CHAPTER 2 - Transfers Incident to Divorce

Property Rights

Marital Property

Common Law Property

Community Property

Equitable Distribution

Separate Property

Asset Division Principles

Premarital Agreements

Uses & Benefits

Control & Scope

Limitations

Retirement Equity Act of 1984

Enforceability Requirements

Checklist

Uniform Premarital Act - The California Example

Permitted Items of Agreement

Unenforceable Items

Property Settlements

Section 1041

Application of §1041

Mandatory Scope

Property vs. Income

Savings Bonds

Receivables

Interest

Imputed Interest

Incident to Divorce

Related To Termination

Rebuttable Presumption

Divorce or Separation Instrument

Transfers in Trust

Third Party Transfers

Property Basis

Gift Variation

Passive Activity Loss Property

Property Transferred In Trust

Basis in U.S. Savings Bonds

Negotiated Property Divisions

Adjudicated Property Divisions

Caselaw

General Rule - Immediate & Specific

Liabilities

Holding Period

Notice & Record keeping

Purchases Between Spouses

Residence

Home Mortgage Interest

Deferral & Exclusion of Gain

Business & Investment Property

Recapture

Section 1031 Exchange

Asset Separation

Final Personal Property Regulations

General & Product Class

Multiple Asset Exchanges

Related Parties

Two-Year Restriction

Foreign Property

Form 8824

Spousal Transfers

Installment Sale of Assets

Selected Asset Divisions

Residence

Section 121 Home Sales

Two-Year Ownership & Use Requirements

Special Divorce Rules

Tacking of Prior Holding Period

Prorata Exception

Limitations on Exclusion

Installment Obligations

Business Interests

Corporate Stock

Cases & Rulings

PLR 9046004

Arnes Cases

Mrs. Arnes v. United States, 981 F .2d 456 (9th Cir. 1992)

Mr. Arnes v. Commissioner, 102 TC 522 (1994)

Blatt Case

Gaughan Case

Section 302 Stock Redemption

Recapitalization

Partnerships

Section 736(a) Payments

Effect on Recipient

Section 736(b) Payments

Effect

Exclusions From §736(b) Treatment

Liabilities

Series of Payments

Section 754 Election

Insurance Policies

Real & Personal Property

Classification of Assets

Character of Gain or Loss

Capital Assets - §1221

Long-Term or Short-Term

Installment Sale

Net Gain or Loss

Treatment of Net Capital Gains

Section 1231 Assets

Gains & Losses

Recapture Of Net Ordinary Losses

Ordinary Assets

Depreciable Property

Recapture on Personal Property

Section 1245 Property

Treatment of Gain

Recapture on Real Property

Section 1250 Property

Pension Benefits

Qualified Domestic Relations Order

Taxation of Distributions

Deferred v. Present Division of Benefits

Deferred Division Arguments

Present Division or Alternate Property Arguments

Individual Retirement Arrangements

IRA Deduction Limit

Rollovers

Divorce Distributions

Amounts Not Rolled Over

Retirement Planning After Divorce

Social Security Benefits

Divorced Spouse Benefits

Divorced Widow(er) Benefits

Military Pensions

Divorced Spouse Benefits

Jurisdiction Requirement

Disposable Pay

Direct Payment

Divorced Widow(er) Benefits

Social Security Offset

Civil Service Pensions

Divorced Spouse Benefit

Divorced Widow(er) Benefit

Railroad Pensions

Divorced Spouse Benefit

Divorced Widow(er) Benefit

Bankruptcy

CHAPTER 3 - Alimony & Child Support

 Spousal Support - aka Alimony

Divorce or Separation Instrument

Invalid Decree

Amended Instrument

Premarital Agreements

Instruments Executed After 1984

Alimony Requirements

Payment Must Be In Cash

Payments to a Third Party

Written Requests, Consents, or Ratifications

Payments for Family Residence

Taxpayer-Owned Home

Spouse-Owned Home

Jointly-Owned Home

Rent On Property Owned by a Third Party

Payments for Life Insurance

Contingent Interest

Voluntary Payments

Payments to Remarried Spouse

Designating Payments as Not Alimony

Members of Different Households

Exception

Termination at Death

Substitute Payments

Child Support

Past Due Child & Spousal Support Payments

Joint Return Prohibited

Minimum Term Rule for 1985 & 1986 Instruments

Exception

Instruments Executed Before 1985 - Prior Law

Alimony Requirements

Periodic Payments

Exception for Installment Payments

10 Years Or Less

More Than 10 Years

Mixed Payments

Marital or Family Relationship

Property Settlement

Child Support

Deducting Alimony Paid

Reporting Alimony Received

Alimony as Compensation

Recapture of Alimony for Type A & B Agreements

Exceptions to Recapture

Including the Recapture in Income

Deducting the Recapture

TRA ‘84 Recapture - 1985 & 1986 Instruments

TRA ‘86 Recapture - After 1986 Instruments

Exceptions

Computation

Alimony Substitution Trusts & Annuities

Advantages of Alimony Trust

Disadvantages of Alimony Trust

Annuities

Alimony Paid by Estate

Child Support

Contingency Relating To the Child

Clearly Associated With a Contingency

Heller Case

Rebuttable Presumptions

COBRA Coverage

Coverage Termination

Notice

Election

Choice of Coverage

Cost

Deductibles

Qualified Medical Child Support Orders

Definition

Procedures & Duties

Jurisdiction

CHAPTER 4 - Selected Marital Tax Issues Outside Divorce

Federal Income Tax

Marriage Penalty

Standard Deduction Increased for MFJ

15% Bracket Amount Increased for MFJ

Will The Marriage Penalty Really Go Away?

Spousal Travel

Regulations - Spousal Travel

Additional Cost Rule

Husband-Wife Partnerships

Qualified Joint Venture Election

One Spouse Employed by the Other

Federal Estate Tax

Dower & Curtsey - §2034

Community Property Comparison

Joint Interests - §2040

Qualified Joint Interest

Powers of Appointment - §2041

Ascertainable Standard

5/5 Power

Life Insurance - §2042

Incidents of Ownership

Community Property Issue

Marital Deduction - §2056

Outright to Spouse

Marital Deduction (QTIP) Trust

Qualified Terminable Interest Trust

Requirements

Net Value Rule

Non-Citizen Spouse

Gifts to Non-Citizen Spouses

Tax Basis for Estate Assets - §1014

Community Property Cost Basis

Business Interests - Death of a Spouse

Bypass Trust

Gift Taxes - §2501 to §2524

Gift Tax Computation

Calculation Steps

Applicable Exclusion - §2505

Application - §2501

Entity Rule

Split Gifts - §2513

Community Property States

Annual Exclusion

Per Donee/Per Year 4-70

Gifts in Excess of the Annual Exclusion  4-70

Gift Tax Marital Deduction  4-70

Nondeductible Terminable Interests  4-70

Social Security Survivors Benefits  4-70

Appendix A - Section 71 & Regs

Appendix B - Section 1041 & Regs

Appendix C - California Uniform Premarital Agreement Act

Glossary