March 8, 1985
__________ was divorced from her husband in 1983 under a Connecticut divorce decree, but has recently moved to Massachusetts. You inquire as to the income tax consequences of the receipt of one hundred and thirty dollars per week under the decree which is designated, as "unallocated family support for the benefit of the...[wife] and the minor children." The decree provides that the payments shall terminate upon the earlier happening of either the youngest child reaching the age of eighteen or the death of either spouse.
Massachusetts gross income is the federal gross income with certain modifications. The receipt of payments under a divorce decree is includable in Massachusetts gross income if it is includable in federal gross income as defined under the Internal Revenue Code ("Code") as amended on February 1, 1983 and in effect for the taxable year (references to code sections will be the Code as of February 1, 1983). Payments received as alimony or separate maintenance are includable in gross income under Section 71(a) of the Code, whereas payments received to support minor children of the husband are not taxable under Section 71(b).
To come within the Section 71(a) definition of alimony or separate maintenance, the payments must be made under (1) a decree of divorce or of separate maintenance or under a written instrument incident to divorce or separation; (2) a written separation agreement; or (3) a decree of support. In addition, the payments must be "periodic payments", which are either payments made in a fixed amount for an indefinite period, or payments made in an indefinite amount for a fixed or indefinite period. U.S. Treas. Reg. § 1.71-1(d)(3)(i)(a) and (b) includes in "periodic payments" those amounts in the nature of alimony or support allowance which are subject to anyone or more of the contingencies of death of either spouse, remarriage of the wife, or change in the economic status of either spouse.
Child support payments are exempt from the tax under Section 71(b) only if "the terms of the decree, instrument, or agreement fix, in terms of an amount of money or a part of the payment, as a sum which is payable for the support of minor children of the husband." (I.R.C. § 71(b)). The United States Supreme Court has interpreted this requirement strictly in Commissioner v. Lester, 366 U.S. 299 (1961), stating, "…if there is to be certainty in the tax consequences of such agreements the allocations to child support made therein must be specifically designated and not left to determination by inference or conjecture."
The Tax Reform Act of 1984, Public Law 98-369, drastically changed the federal provisions relating to alimony and child support payments for divorce and separation instruments executed after 1984. The Act also applies to divorce and separation agreements executed before January 1, 1985 but modified on or after such date if the modification expressly provides that the amendments made by this Section shall apply to such modifications. Massachusetts income tax law is not affected, however, because it is linked to the federal Code as amended on February 1, 1983 and in effect for the taxable year.
For federal and Massachusetts purposes, the payments under the divorce decree are periodic payments because they are in the nature of alimony and subject to the death of either spouse. No amount of the payment is eligible child support since there is no specific designation of an amount for child support in the decree.
Therefore, the entire amount received under the divorce decree is included in Massachusetts gross income and taxed as five percent income.
Very truly yours,
/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue
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