Divorce in a Post-Tax Reform World with a Focus on Cross-Border Issues
Significant legislative changes that impact the deductibility and income taxation of alimony payments made to and received by former spouses were made effective in 2019 and have needed to be considered since the 2020 tax year. Withholding tax rules in which the former spouse receiving the alimony payments is a non-U.S. person and the payor spouse is a U.S. person have been affected.
The rules are further complicated by the differences in how alimony is taxed in other countries, which can create double taxation unless a tax treaty exists and rectifies the whipsaw effect.
Additionally, the division of property between former spouses, where either spouse is not a U.S. person, can trigger unanticipated income tax consequence and withholding tax exposures not often contemplated, particularly where the transfer of U.S. real property is involved.
This presentation will highlight these pitfalls and give suggestions on how to structure alimony payments and property divisions that arise in a cross-border context as well as other issues that are often overlooked.