A Human Capital Theory of Alimony and Tax

95 Pages Posted: 23 Mar 2017 Last revised: 14 Nov 2017

Tessa Davis

University of South Carolina - School of Law

Date Written: March 20, 2017

Abstract

The current taxation of alimony is a broken scheme. Severed from any strong theoretical mooring, it draws lines in the sand between property settlement, child support, and alimony. The lack of coherence between the substance of alimony in family law and the tax concept of alimony (“tax alimony”) could be justified on other policy grounds, however. Yet current law, which allows the payor a deduction under §215 and requires inclusion by the recipient per §71, is difficult to interpret, resulting in frequent litigation and costly noncompliance. In short, the current concept of tax alimony fails to satisfy any of the three traditional metrics of tax policy — fairness, efficiency, or administrability — while also failing to consistently track the substance of the payment under family law. This Article argues that returning to family law theory provides a way forward for reforming the tax treatment of alimony. Specifically, this Article argues that family law theories of alimony support keeping alimony in the tax base of the payor (repealing §215) and excluding alimony received from the base of the recipient (repealing §71).

Keywords: Tax, Tax policy, Family law, Alimony, Human capital, Internal Revenue Code, Maintenance, Support

Suggested Citation

Davis, Tessa, A Human Capital Theory of Alimony and Tax (March 20, 2017). George Mason Law Review, Vol. 25, No. 2, 2018. Available at SSRN: https://ssrn.com/abstract=2938046

Tessa Davis (Contact Author)

University of South Carolina - School of Law ( email )

1525 Senate Street
Columbia, SC 29201
United States

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