Unallocated Family Support

In an article in the January, 2004, issue of The Matrimonial Strategist, I discussed the use of temporary support orders in a divorce action to allow the payor to deduct undifferentiated family support payments or for the purpose of paying debts, such as counsel fees, in light of a series of recent cases. The leading case disallowing the deduction of family support payments is Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002) (Colorado law; family support payments) but there are decisions involving the law of other states, mainly found in a series of Tax Court memorandum decisions. Some more recent cases now cast doubt on these precedents, leaving resolution of the issue uncertain, both for temporary orders, which by definition abate with the death of one of the parties to the pending divorce action, and for permanent marital settlements. They also raise the question whether an explicit termination provision would be effective if federal tax authorities conclude that the relevant state court would decide that the termination clause could not apply to the payor's child support obligation included within the support payments required by the order. A survey of state law reveals that this question is unresolved in almost every state, leaving the field wide open for federal tax determination of an important state law issue.