Court denies alimony deduction for lump-sum pension payment after divorce
Ditullio v. Commissioner, T.C. Memo. 2025-120, No. 4049-23. BL 412469.
A one-time $50,000 payment tied to pension benefits failed the alimony rules because the obligation did not clearly end at the ex-spouse’s death.
Holding
The Tax Court held that a $50,000 lump-sum payment made to an ex-wife was not alimony under §71(b)(1) and therefore was not deductible under §215(a). The IRS deficiency was sustained. The accuracy-related penalty was conceded.
Why It Matters
Lump-sum divorce payments often fail the alimony test.
Silence on termination at death is fatal under §71(b)(1)(D).
Labeling a payment as “pension distribution” strengthens property-settlement treatment.
Reliance on state pension rules fails if the required instruments are never executed.
Timeline
2005–2017: Marriage.
2013: Taxpayer becomes permanently disabled.
March 2017: Final Judgment of Divorce executed.
March 2020: State pension board approves retroactive disability benefits.
June 2020: Consent Order executed and $50,000 paid.
November 2022: IRS issues notice of deficiency.
November 2025: Tax Court issues…
