There are basically five statutory requirements for a taxpayer to claim money transferred to them as alimony payments. If divorce or separate instrument characterizes a payment as “alimony” but fails to satisfy the five requirements under Code Section 71, the payment will not be treated as alimony for federal income tax purposes, regardless of what it is considered under state law. These fix requirements include: 1. Payment must be made in cash 2. Paid to or on behalf of spouse … Read more →

The assignment of income doctrine basically is defined as income that is taxed to the individual who earned it, even if the right to the income has been transferred to another individual prior to recognition. This means that compensation, interest, rents, dividends, and other forms of income usually must be included in the gross income of the recipient even if the income was transferred to another individual. Assignment of Income Doctrine A tax problem arises when an individual attempts to … Read more →

A passive activity is defined as “any activity which involves the conduct of a trade or business, and in which the taxpayer does not materially participate” according to Code Section 469(c)(1). Also included in the definition are rental activities, without regard to the extent of taxpayer participation. This basically excludes trade or business activities in which a taxpayer does materially participate are not passive activities. In terms of real estate activities, these are generally considered to be passive no matter … Read more →