[Anonymous]

Hey,

Can anyone explain me the logic of alimony recapture….i dont mean the formula….but what this means and the logic behind it. Just starting with REG…and realised its important to understand these terms conceptually rather than just mugging up the formula. I’m following Wiley/yeager combo,

Thanks in advance!

[Anonymous]

I was wondering myself, the best I could come up with is an AICPA Case Study:

https://www.aicpa.org/PUBS/taxadv/online/mar2003/casestud.htm

[Patrick909]

I would not worry too much about it. When I first started studying for REG, I worked myself into a frenzy because I had no idea how to deal with alimony recapture. Frankly, I don't even understand the logic behind it. Seems like a bad deal to me…..you PAY alimony, and you have to recapture it as income??? I still don't understand it.

The odds of that being heavily tested on your exam are not very good. I would just move on instead of wasting any more time on that ridiculous concept.

[Anonymous]

Hey guys,

THank you so much! First of all, its such a relief to know that its not just me who doesnt understand things (esp. in the first shot) 🙂 I dont have a tax background…never studied before….so m kind of worried about REG…dont know what is important and whats not. Btw did any of you study Wiley/Yeager combo? Phil skips a lots of things from the book….although he says its ok…and if things work well this way, i have no intention of doing extra work….but just wanted others opinion…whatever book/course you followed, did the instructor skip things, and was what they covered enough for the exam?

NJTProadwarrior,

THank you for the link!!

[Patrick909]

My Bisk lectures didn't cover alimony recapture. I think there was only about 1-2 problems in the textbook on it, neither of which made any sense.

The sense I get is that the actual calculations with those problems are a little too complicated to get much play on the exam. I have a feeling that the most you'd be asked on the subject is a small conceptual-type question. Bottom line, aside from having a very general familiarity with it, I'd ignore it.

There's too much else in REG that *will* be tested heavily, to worry about that.

[zena]

Becker 2010 didn't not mention alimony recapture either and I haven't seen any HW questions on it. From the link that NJTProadwarrior posted, my understanding is that the purpose of the recapture is to prevent divorcing couples from disguising other property transfer as alimony and, as such, avoid paying taxes. They use some formula to determine what amount of the payment that was initially deducted by the payer should be recaptured as income because it exceed what the law determined to be ‘reasonable' alimony. I agree with Patrick909 though that this area is very unlikely to come up on the exam.

FAR 86 | BEC 94 | AUD 90 | REG 85
All done! used Becker

[Anonymous]

I also used Becker 2010 and didn't see this. I wouldn't worry much about it.

[Shawna]

I used Becker and it did not review this topic. I took REG last year and it was not even mentioned on the test. I would move on…..

FAR- 70, 76 REG - 91 BEC - 80 AUD - 74, 85

GA - NASBA state

[Anonymous]

Dharana;

I used Yaeger and took REG and passed on the first time.

My suggestions:

If Phil says you can disregard a topic (especially on Individual Taxation), then you can be reasonably satisfied that the topic is not going to be on the exam. And, I strongly suggest that you follow their instructions with business law topics – I felt that they did an outstanding job preparing me for it…

Good Luck! : )

[Anonymous]

NJTProadwarrior,

Thank you so much. I was starting to get worried. Individual Tax has loads of information……..i dont want to study extras if i dont have to. I'm really liking Yeager so far…..

I hope I pass REG on my first try too. 🙂

[SeattleAccountant]

thread bump

Logic behind “Alimony Recapture”

Alimony recapture exists due to reasons that IRS wants to make sure that pmts deducted by the payor and income reported by receiving party are not disguised property settlements but true alimony.

Recall that alimony gets treated this way: payor deducts it in on his return and receiving party reports it as income on her return.

Now, contrast that to divorce property settlement: nothing gets deducted, no income reported by the receiving party. Former spouses just divided and re-shuffled their jointly owned assets.

Suspicion on alimony pmts being claimed (usually by the paying party since that person can deduct it) that should be rather non-deductible property transfers occurs when during the first 3 years those alimony payments are gradually decreasing. Depending on the amounts of decrease, IRS may decide to review return and disallow deduction (bad thing for the payor = taxable income higher = taxes owed) and, simultaneously, affect the other party by reducing reported income (possibly good thing = less taxes).

Refer to NINJA notes for the detailed amounts, but in quick: if Alimony paid first year is greater than average paid in year 2 & 3 plus additional 15K, Houston we got a problem 🙂

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Anonymous]

Thanks for bringing this back up. It's good to keep it in mind for gaining all the points we can get.

[Author]

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