As Opening Day approaches, much of the buzz about the LA Dodgers focuses on the owners’ high profile divorce case. There are numerous legal issues in the case, as well as millions of dollars at stake.

While Frank and Jamie McCourt are currently litigating the issue of temporary spousal support (with Jamie requesting nearly $1,000,000 per month), the bigger issue in the case is whether the Dodgers are community property. The team was purchased during marriage, raising the presumption that it is a community property asset. However, Frank McCourt asserts that a post-marital agreement signed in 2004 transferred title of the parties’ residential properties to Jamie and made him the sole owner of the team. Jamie is seeking to invalidate the post-marital agreement. It will be interesting to see how it unfolds.

http://sports.espn.go.com/los-angeles/mlb/news/story?id=5037133&campaign=rss&source=MLBHeadlines

Recently, a Chicago father has been in the news for violating a custody order by taking his daughter to a Catholic mass. Specifically, Father converted to Judaism after marrying Mother, and allegedly agreed to raise their daughter Jewish. However, they soon separated, and Father began practicing Catholicism again and even had their daughter baptized Catholic. Thereafter, in the midst of a bitter custody battle, the court issued an order that Father could not expose his daughter to any religion other than Judaism. Father allegedly violated that order by taking his daughter to a Catholic mass and Mother filed a contempt motion; the issue is still pending.

In California, when adjudicating custody, courts cannot base a custody or visitation decision on one parent’s religious practices without a clear showing that the religious practices are detrimental to the child. Generally speaking, each parent is entitled to religious freedom with regard to his or her child and may decide what he or she believes is in the child’s best interests. In fact, addressing religious issues during a custody/visitation dispute raises serious First Amendment concerns regarding the freedom of religion, so most courts attempt to steer clear of these issues. Courts will only intervene when the parent seeking to limit the other from exposing or practicing another religion demonstrates that the belief or practice actually presents a substantial threat of harm to the child.

Husband and Wife entered into a Marital Settlement Agreement predicated upon their ultimate judgments of divorce.  If the couple were to enter into a divorce, the provisions of the agreement would be fully incorporated into the final divorce judgment.

The agreement included two provisions regarding their respective rights upon death of the other party with respect to the property of the other.  This included an interest in past, present and future spousal support obligations accepting any obligations set forth in the agreement itself.

The agreement provided that it was binding and shall inure to the benefit of the parties and their heirs except as specifically excluded by the agreement.  Any terms not met would be an obligation of the decedent spouse’s estate.

The agreement obligated the husband to provide a sizeable sum in escrow to his wife upon the entry of a divorce judgment.  This amount would be used to purchase a condominium for her prior to the divorce; the unused balance of the escrow account was to be paid to the wife after the divorce was final.  The agreement also obligated the husband to pay the condominium fees prior to the final divorce judgment.

The agreement also required the husband to pay the wife’s attorney’s fees up to a set amount.

The husband paid as mandated by the agreement and attempted to deduct it as spousal support.  The IRS disallowed the deduction and found that the Marital Settlement Agreement which had been fully incorporated at that point into the final divorce judgment did not support his claim that it was spousal support giving him the benefit of the deduction for those sums paid.  The IRS further found that the agreement, by its terms, caused the escrow account to be an obligation account that would not cease upon the death of the wife and as such was disallowed.  Spousal support cannot continue after the death of either spouse as a matter of law.

Wife and Husband filed for dissolution of their marriage a couple years back.  Prior to their final judgment of divorce, the couple reached an agreement for a lump sum spousal support payment.  Marital Settlement Agreement called for a payment of approximately $150,000 and the final judgment incorporating the Marital Settlement Agreement was issued by the court.

The final Judgment was entered several months later and indicated that Husband had paid the lump sum spousal support by certified check.  The final Judgment stipulated a much larger number as the total lump sum spousal support payment with the following adjustments:

• Reduction for a distribution to the wife of Husband’s half of the proceeds from the sale of their home
• An addition for personal property distribution to the wife
• An addition for the wife’s payment of a personal debt of the husband
• A reduction for Husband’s payment of joint debt
• A reduction for Husband’s assumption of one of Wife’s debts
• A reduction for a transfer of Husband’s investment account.

The couple filed a joint return for the prior year reflecting deductions for the year in which the lump sum, with adjustments, spousal support payment was made.  The IRS initially disallowed the entire amount claimed and ultimately agreed to the lump sum spousal support payment as the only one that was properly deductible; the balance of the payments redistributing the couple’s debt and assets were disallowed by the IRS.

Frequently in dissolution settlement a lump sum spousal support buyout includes a number of features that are nothing more than settlement of personal property (to include cash assets such as industrial accounts and the like) and real property and as such would not be deductible as spousal support.  It is also typical that a spousal support buyout be treated as a non taxable event such that the payor does not get the typical spousal support deduction for the amount paid and the receiving spouse does not have to pay tax as it is described as a property division or settlement.  In that case the agreement itself dictates that the payment would not be a deductible for the payor nor would it be income for the payee.