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LJS v JES, 464 Mass. 346, 982 N.E. 2d 1160 (2013)

In L.J.S. v J.E.S., the Supreme Judicial Court held that if an issue of tax consequences has been raised, and appropriate evidence of the same has been presented to the court, the court must consider those tax consequences when creating an alimony order.

The parties’ judgment of divorce provided, in part, that the wife occupy the marital home until the youngest child graduates high school. At that time, the marital home would be listed for sale. Upon the sale of the home, the husband’s alimony would significantly decrease. However, under I.R.C. § 71(c)(2) alimony payments may be re-characterized as non-deductible child support for tax purposes if the amount is reduced on a contingency relating to a child (such as attaining a specified age, marrying or leaving school). As a result, the husband moved to alter or amend the judgment, and requested, among other things, that the future reduction of alimony not depend upon a child-related event.The trial court, determining that I.R.C. § 71 (c) (2) did not apply, issued an order which did not include the husband’s proposal regarding alimony.The Supreme Judicial Court vacated the trial court’s order.

Since neither party nor the Supreme Judicial Court could cite any case on point, it was uncertain whether the Internal Revenue Service would, in fact, re-categorize the alimony in this instance. However, the Supreme Judicial Court held that the trial court should have considered that uncertainty and alternatives that would accomplish the court’s purposes but avoid potential adverse and unwanted tax consequences. The Supreme Judicial Court held that where the issue of tax consequences has been raised and the judge has been provided with appropriate evidence in the record, the judge should consider the tax consequences arising from the judgment.

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