Carlyn McCaffrey is an estate and tax attorney out of New York and author of the book, “Structuring the tax consequences of marriage and divorce.”
At the recent 2019 Heckerling conference, she gave a presentation entitled “Decisions and Revisions Which a Minute Will Reverse – How the 2017 Tax Act Changed the Tax Consequences of Marriage and Divorce.”
Our linked article provides comprehensive notes from her talk that should be of interest to tax and divorce attorneys, financial planners, accountants and a host of other professionals. Let’s examine the issue.
Many longstanding tax provisions affecting marriage and divorce have been substantially changed by the sweeping Tax Cuts and Jobs Act of 2017. McCaffrey begins by noting that the federal government does not have its own definition of marriage and divorce – this matter is left to the states. As with all matters involving the separation of powers in the US, what is simple in principle can become complicated in execution.
Cases exist of couples trying to exploit the situation by obtaining a divorce legally recognized by their state in order file individual tax returns with the federal government. Once the filing is complete, they promptly remarry. This stratagem was tested in court and despite the purported sovereignty of states in the matter, it was ruled invalid for federal taxation purposes.
The matter is relevant because concerns have arisen that couples may have rushed through divorce settlements before December 31, 2018 (the deadline for application of the old tax code’s rules). History suggests that the IRS may closely scrutinize the taxes of such couples, should they suddenly remarry in the new year.
For more information, please read:
How the 2017 Tax Act Changed the Tax Consequences of Marriage and Divorce | Wealth Management