TAXATION

Question 1

When did TCJA go into effect?

Answer 1

January 1, 2019

Question 2

Are prenups executed prior to December 31, 2018, grandfathered into pre TCJA tax code?

Answer 2

No - bc those are not written instruments considered to be “incident” to divorce

Question 3

For alimony agreed upon December 31, 2018 and earlier, in order for it to meet tax code for taxable/deductible, what elements must be bet

Answer 3

1. Documents: Written instrument, not an oral agreement.
2. Dumping: Cannot be front loaded or subject to recapture.
3. Designation: Cannot be stated it is “not alimony”.
4. Distance: Parties cannot live together or file joint tax returns.
5. Dollars: Must be cash or a cash equivalent, not services.
6. Dependents: Cannot be child support.
7. Death: Payment obligation must end at the recipient’s death (or sooner).

Question 4

What can be a negotiating tool if parties are still legally married but one desires to file separately

Answer 4

If your client is married but filing separately for 2019, they cannot take the standard deduction if the spouse is itemizing his or her deductions

Question 5

What criteria must a spouse meet to claim innocent spouse relief

Answer 5

 You filed a joint return that has an understatement of tax that’s solely attributable to your spouse’s erroneous item.

 An erroneous item includes income received by your spouse but omitted from the joint return.

 Deductions, credits, and property basis are also erroneous items if they’re incorrectly reported on the joint return;

 You establish that at the time you signed the joint return you didn’t know, and had no reason to know, that there was an understatement of tax; and

 Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understatement of tax.

Question 6

Under TCJA, what happened to personal and dependent exemptions?

Answer 6

Suspended from 2018 - 2025

Question 7

What criteria must a child meet in order to qualify child for tax credit

Answer 7

Test to Determine if Qualifying Child:
 Child younger than 17;
 Child provides less than ½ his support;
 Child lives with parent over ½ the year;
 Child is US citizen; and
 Child has SSI number.

Question 8

In a divorced situation when one parent has more nights in the year, what can be done so other parent can claim child

Answer 8

Can file form 8332 and that parent can’t then claim the kid

Question 9

When do tiebreaker rules for dispute over qualifying child come into play

Answer 9

If divorce or separation decree does not state that the noncustodial parent may claim the dependent, or there is no written declaration from the custodial parent, tiebreaker rules are in effect.

Question 10

What are the tiebreaker rules

Answer 10

 The parent who the child spends the most time with may claim the dependent.

 If the child spends equal time between both parents, then the parent with the highest adjusted gross income may claim the dependent.

 If only one of the taxpayers is the child’s parent, that parent may claim the dependent.

Question 11

How did TCJA make the child tax credit more valuable

Answer 11

It’s doubled the credit to $2,000 per “qualifying child” and making it available to most taxpayers; it only begins to phase out for single filers at adjusted gross incomes of $200,000. Unlike the dependency exemption, it’s a credit: that is, it applies dollar-for-dollar against any taxes owed. Even better, it’s a refundable credit of up to $1,400 per child. This means that if the amount of the credit is larger than the tax owed, then the taxpayer gets a cash refund for the difference (up to $1,400).

Question 12

How does child qualify for child tax credit

Answer 12

 Must be claimed as a dependent; AND
 Must be 16 or younger on the last day of the year;
 Must be a US citizen, US national, or a resident alien;
 Must be related by blood, or step relationship, or legally adopted child/foster child;
 Must have resided with the parent for more than half of the year;
 Parent must provide them with more than half of their support.

Question 13

How does child qualify for child tax credit for separated parents

Answer 13

A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following apply:

The parents:
 Are divorced or legally separated under a decree of divorce or separate maintenance;
 Are separated under a written separation agreement; or
 Lived apart at all times during the last 6 months of the year,
 whether or not they are or were married;
 The child received over half of his or her support for the year from the parents;
 The child is in the custody of one or both parents for more than ½ of the year.

Question 14

what is dependent care credit

Answer 14

If parent pays a daycare center, summer camp or other care provider to care for a qualifying child under 13 or disabled dependent of any age, parent may quality for tax credit of 35% of qualifying expenses of $3,000 for one child or up to $6,000 for two or more children.

Question 15

can dependent care credit be given to noncustodial parent

Answer 15

No - not even if they claim the child as a dependent that year

Question 16

what is the standard deduction for married filing jointly in 2023

Answer 16

$27,700

Question 17

what is the standard deduction for filing married but separately in 2023

Answer 17

$13,850

Question 18

what is the standard deduction for head of household in 2023

Answer 18

$20,809

Question 19

Is interest on 529 taxable

Answer 19

No

Question 20

what can 529 plans be used for now and what are its limitations

Answer 20

Before, you could only use it for post secondary education and NOT private school but now you can use it towards tuition for K-12 schools, including public, private, and religious school.

Question 21

What change made to mortgage interest deduction as of 12/16/2017

Answer 21

Now, can only claim interest deduction on mortgages of $750k or under ($375k per married tax payor)

Question 22

What is rule on deduction of home equity lines

Answer 22

Not deductible unless it was taken to build an addition to your home but not it it was used to pay personal debt

Question 23

what is the annual gift tax exclusion as of 2023

Answer 23

$17,009. Anything over $17k must be reported by donor on gift tax return

Question 24

What is the lifetime gift tax exemption as of 2023

Answer 24

$12.92M

Question 25

what is a lifetime gift tax exemption

Answer 25

The amount of money or assets the government permits you to give away over the course of your lifetime without having to pay the federal gift tax.

Question 26

what is portability of a lifetime gift tax exemption

Answer 26

A surviving spouse may elect to use any unused portion of the deceased spouse’s federal estate tax exemption. However, portability is not automatic. A tax return for the deceased spouse’s estate must be filed (even if the estate is not taxable), and the portability option selected

Question 27

We know no tax due on transfers incident to divorce. How is incident to divorce defined?

Answer 27

If transfer occurs within 1 year after marriage ends or is related to marriage ending

Question 28

When is a transfer incident to divorce related to marriage ending?

Answer 28

(a) the transfer is made under the original or modified divorce or separation instrument; and

(b) the transfer occurs within 6 years after the date the marriage ends.

Question 29

Should court consider capital gains for jointly owned property distributed in ED

Answer 29

Fla. Stat. §61.077: Setoffs or credits upon sale of former marital home: Absence a settlement agreement, the court shall consider “whether one or both parties will experience a capital gains taxable event as a result of the sale of the marital home” before determining the issue of credits or setoffs in its final judgment.

Swergold v. Swergold, 82 So.3d 1148 (Fla. 4th DCA 2012), in which the final judgment did not reference section 61.077 or outline the factors which the trial court used to equitably determine that the former husband would not receive any credits for expenses of the marital home for which he was alone made responsible. Thus, remand was necessary for clarification on former husband’s entitlement to credits upon sale of the marital home

Question 30

What happens from a tax standpoint if a spouse transfers property to a 3rd party on behalf of their spouse incident to divorce

Answer 30

It is treated as two transfers. Spouse to spouse no tax. Former spouse will have transfer tax to 3rd party in the second transfer transaction.

Question 31

In order for the second transfer tax to apply, what must occur

Answer 31

 Required by the divorce or separation instrument.

 Requested in writing by the spouse or former spouse.

 Consented to in writing by the spouse or former spouse. The consent must state that both spouses or former spouses intend the transfer to be treated as a transfer from one spouse to another subject to the rules of Internal Revenue Code. Consent must be obtained before filing the tax return for the year the property was transferred.

This treatment does not apply to transfers to which certain stock redemptions apply

Question 32

how are capital gains & losses long term and short term defined

Answer 32

 Long Term (held more than 1 year) – if the asset is held for more than one year before it is disposed of, the capital gain or loss is long-term.

 Short Term (held less than 1 year) – if the asset is held one year or less, the capital gain or loss is short-term.

Question 33

what is the basis of a capital asset that is gifted

Answer 33

Not the cost when it was bought. It’s the adjusted basis to the donor just before it was given to the recipient, its fair market value at the time it was given, and any gift tax paid on it must be ascertained.

Question 34

If a capital asset is inherited from a decedent, what is the capital basis

Answer 34

1. The FMV of the property at the date of the decedent’s death.
2. The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation.
3. The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes.
4. The decedent’s adjusted basis in land to the extent of the value excluded from the decedent’s taxable estate as a qualified conservation easement.

Question 35

What might need to be done for transfer of property between spouses if it’s a transfer incident to divorce

Answer 35

No tax due but you may need to file a gift tax return

Question 36

How do we determine how long an asset was held for purposes of determining its basis

Answer 36

Count from the date after the day the asset is acquired up to and including the day the asset was disposed of

Question 37

What is the maximum amount you can claim on capital loss carry forward

Answer 37

$3,000

Question 38

Explain how capital loss carry forward works

Answer 38

If you have a net loss greater than $3,000 e.g. $4,000, you can offset $3,000 from your ordinary income and carry forward a $1,000 loss for the following year. If it’s a huge loss, you can carry forward indefinitely but it terminates at death.

Question 39

how should family court deal with capital loss carry forwards

Answer 39

It must equitably distribute the loss. It’s error to not address it.

Question 40

What is marginal rate v effective rate

Answer 40

Marginal rate is the highest rate a person is taxed

Effective rate is the average rate

Question 41

What can a QDRO be used for

Answer 41

Payment of child support, alimony, marital property rights to a spouse, child or other dependent of the participant

Question 42

How are taxes treated for benefits paid to a child or other dependent via QDRO

Answer 42

The participant is taxed if it’s a payment for participant’s child or dependent

Question 43

How are benefits paid to a former spouse via qdro handled tax wise

Answer 43

Benefits under QDRO paid to a participant’s spouse must generally be included in spouse’s or former spouse’s income

Question 44

The trial court distributes to FW the FH’s Deloitte & Touche pension payments in its final ED. It awarded FW a lump sum payment of $59,220, representing her half of the pension benefits paid to the former husband since he retired, plus interest without consider tax consequences. Is this error?

Answer 44

Kvinta v. Kvinta, 277 So.3d 1070 (Fla. 5th DCA 2019)

YES - The court failed to consider the tax consequences, in that said amount represented the gross benefits received by the former husband that was then subject to taxes.

Question 45

How do we determine gross income

Answer 45

Fla. Stat. §61.046(8) defines “income” to mean any form of payment to an individual, regardless of source, including, but not limited to: wages, salary, commissions and bonuses, compensation as an independent contractor, worker’s compensation, disability benefits, annuity and retirement benefits, pensions, dividends, interest, royalties, trusts, and any other payments, made by any person, private entity, federal or state government, or any unit of local government.

United States Department of Veterans Affairs disability benefits and unemployment compensation, ARE EXCLUDED from this definition of income except for purposes of establishing an amount of support.

Question 46

How do we determine net income

Answer 46

Fla. Stat. §61.30(3) addresses the calculation of net income for purposes of child support:

Net income is obtained by subtracting allowable deductions from gross income.

Question 47

What are allowable deductions for purposes of determining net income for CS

Answer 47

Allowable deductions shall include:

a. Federal, state, and local income tax deductions adjusted for actual filing status and allowable dependents and income tax liabilities.

b. Federal insurance contributions or self-employment tax.

c. Mandatory union dues.

d. Mandatory retirement payments.

e. Health insurance payments, excluding payments for coverage of the minor child.

f. Court-ordered support for other children which is actually paid.

g. Spousal support paid pursuant to a court order from a previous marriage or the marriage before the court.

Question 48

Can court order parties to alternate the dependency deduction

Answer 48

Court can order a party to WAIVE the exemption for odd years, on the condition that appellee is current on his child support payments but it can’t order parties to simply alternate.

Question 49

Who can claim the carry loss forward on their return

Answer 49

Only the person who initiated the loss can claim the deduction

Question 50

What else can you carry forward

Answer 50

1. Charitable Contribution Carryforward
2. Investment Interest Carryforward
3. Capital loss carry forward

Question 51

Can legal fees incurred in DOM be deducted?

Answer 51

No but legal fees for tax advice in connection with divorce MAY be deducted as well as legal fees expended to obtain or enforce alimony (if prior to TCJA)