Laura and Leon were granted a divorce in 2006. In accordance with the decree, Leon made the following payments to Laura in 2015: How much should Laura include in her 2015 taxable income as alimony?

Question

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According to the IRS, in order for a payment to be considered alimony, it must meet four requirements:
1. The spouses must not file a joint tax return with each other.
2. The payment must be in cash (or equivalent).
3. The payment must be made to or on behalf of a spouse or former spouse under a divorce or separation instrument.
4. The divorce or separation instrument must not designate the payment as not alimony.

In this case, since the payments were made in accordance with the divorce decree, they meet the third requirement for alimony. However, to be considered alimony for tax purposes, the payments must also meet the second requirement of being made in cash or its equivalent. Of the three payments made by Leon, only the second payment of $4,000 was made in cash. Therefore, Laura should include $4,000 as alimony in her 2015 taxable income.

Laura and Leon Were Granted a Divorce in 2006