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Divorce Tax Planning #491026

Course Overview

Credit

Amount

CPA

15.5

CFP^®

CDFA^®

EA / OTRP

Course Author: Danny Santucci, J.D. Field of Study (CPA): Taxes Field of Study (CFP): Tax Planning Field of Study (CDFA): Financial Planning (Divorce) Field of Study (EA/OTRP): Federal Tax Law

Course Description

Course publication/revision date: This course was updated on 4/3/26 (covers 2026 tax year).

This course will teach participants how to apply, implement, and evaluate the strategic tax aspects of marital dissolutions and living together arrangements. Current perspectives on property transfers, asset divisions, alimony, filing status, exemptions, and child support are examined with an emphasis on planning considerations. Property settlements, basis allocation, third party transfers, and purchases between spouses are explored and analyzed. Special attention is given to the division of business interests, retirement plans (including QDROs), insurance policies, and family residences.

Table of Contents

CHAPTER 1 - Basic Marital Tax Matters1-1

Filing Status	1-2
Marital Status	1-2
Unmarried	1-2
Abandoned Spouse Rule - §7703	1-3
Married	1-3
Same-Sex Marriage	1-3
Joint Return	1-4
Citizenship	1-4
Liability	1-4
Innocent Spouse Exception	1-4
Refund Offset Program - §6402	1-5
Injured Spouse - Form 8379	1-5
Separate Returns	1-8
Itemized Deductions	1-8
Medical Expenses	1-8
Property Tax & Interest	1-8
State Income Taxes	1-8
Casualty Loss	1-9
Separate vs. Joint Dilemma	1-9
Disadvantages of a Separate Return	1-9
Advantages of a Separate Return	1-10
Joint Return After Separate Returns	1-10
Head of Household	1-13
Requirements	1-13
Considered Unmarried	1-14
Keeping Up a Home	1-14
Qualifying Person	1-14
Nonresident Alien Spouse	1-15
Exemptions	1-15
Personal Exemptions - Repealed	1-16
Spouses	1-16
Former Spouse	1-17
Deemed Personal Exemption for Related Incorporating Provisions	1-17
Dependency Exemptions Repealed	1-17
Unified Definition of a Qualified Child	1-17
Four Tests	1-18
Test #1 - Residency (or Time) & Citizenship	1-18
Children of Divorced or Separated Parents	1-18
Test #2 - Relationship Test	1-20
Test #3 - Age Test	1-21
Test #4 - Joint Return Restriction	1-21
Medical Expenses - §213	1-21
Child-Care Credit - §21	1-21
Definition of a Qualified Relative - §152	1-21
$500 Credit for Certain Dependents - §24(h)(4)(A)	1-22
Final Regulations of Qualifying Relatives - TD 9913	1-22
Divorce Costs	1-24
Tax Advice - §212(3)	1-25
Fees to Obtain Alimony or Protect Income - §212(1) & (2)	1-25
Fees to Obtain Property - §1012 & 1016	1-26
Nondeductible Expenses	1-26
Withholding & Estimated Tax	1-26
Joint Estimated Tax Payments	1-27
Refunds & Deficiencies	1-28
Nonresident Alien Spouse Withholding	1-28
Marital Property	1-28
Common Law Property	1-29
Equitable Distribution	1-29
Community Property	1-29
Community Property States	1-30
Transmutation	1-31
Commingling	1-31
Income Reporting	1-34
Spouses with Different Residency Statuses	1-35
Special Income Rules For Spouses Living Apart - §66(a) & §879	1-36
Mandatory Application	1-36
Earned Income	1-36
Social Security Benefits	1-37
Other Income	1-37
Denial of Community Property Reporting - §66(b)	1-38
Community Reporting Relief Provisions - §66(c)	1-39
Ending the Community	1-40
Annulment	1-41
Separation	1-41
Pre-2019 Alimony vs. Community Income	1-42
Living Together	1-43
Married v. Unmarried Tax Rate Comparison	1-43
Sham Divorce	1-43
Dependency Exemptions	1-43
Attributable Income	1-44
Alimony & Property Divisions	1-44

CHAPTER 2 - Transfers Incident to Divorce2-1

Property Rights	2-1
Marital Property	2-1
Common Law Property	2-1
Community Property	2-2
Equitable Distribution	2-2
Separate Property	2-2
Asset Division Principles	2-3
Premarital Agreements	2-5
Uses & Benefits	2-5
Control & Scope	2-6
Limitations	2-6
Retirement Equity Act of 1984	2-7
Enforceability Requirements	2-7
Checklist	2-8
Uniform Premarital Act - The California Example	2-10
Permitted Items of Agreement	2-10
Unenforceable Items	2-10
Property Settlements	2-12
Section 1041	2-13
Application of §1041	2-14
U.S. vs. Foreign Spouse	2-15
Mandatory Scope	2-16
Property vs. Income	2-17
Unpaid Income	2-17
Savings Bonds	2-18
Receivables	2-18
Interest	2-19
Imputed Interest	2-19
Transfers to a Former Spouse Incident to Divorce	2-21
Related To Termination	2-22
Rebuttable Presumption	2-22
Divorce or Separation Instrument	2-23
Transfers in Trust	2-23
Third-Party Transfers	2-24
Property Basis	2-27
Gift Variation	2-27
Passive Activity Loss Property	2-28
Property Transferred In Trust	2-28
Basis in U.S. Savings Bonds	2-28
Negotiated Property Divisions	2-28
Adjudicated Property Divisions	2-29
Caselaw	2-29
General Rule - Immediate & Specific	2-30
Liabilities	2-30
Holding Period	2-31
Notice & Recordkeeping	2-31
Purchases Between Spouses	2-33
Residence	2-34
Home Mortgage Interest	2-35
Deferral & Exclusion of Gain	2-35
Business & Investment Property	2-35
Recapture	2-35
Section 1031 Exchange	2-36
Asset Separation	2-37
Related Parties	2-37
Two-Year Restriction	2-37
Foreign Property	2-37
Form 8824	2-38
Spousal Transfers	2-38
Installment Sale of Assets	2-38
Selected Asset Divisions	2-40
Residence	2-40
Section 121 Home Sales	2-41
Two-Year Ownership & Use Requirements	2-41
Special Divorce Rules	2-42
Tacking of Prior Holding Period	2-42
Prorata Exception	2-42
Limitations on Exclusion	2-42
Installment Obligations	2-43
Business Interests	2-44
Corporate Stock	2-44
Cases & Rulings	2-45
Section 302 Stock Redemption	2-45
Recapitalization	2-45
Partnerships	2-45
Section 736(a) Payments	2-46
Effect on Recipient	2-46
Section 736(b) Payments	2-46
Effect	2-46
Exclusions From §736(b) Treatment	2-47
Liabilities	2-47
Series of Payments	2-48
Section 754 Election	2-48
Insurance Policies	2-50
Real & Personal Property	2-51
Classification of Assets	2-51
Character of Gain or Loss	2-51
Capital Assets - §1221	2-51
Long-Term or Short-Term	2-52
Installment Sale	2-53
Net Gain or Loss	2-53
Treatment of Net Capital Gains	2-53
Section 1231 Assets	2-54
Gains & Losses	2-54
Recapture Of Net Ordinary Losses	2-55
Ordinary Assets	2-55
Depreciable Property	2-55
Recapture on Personal Property	2-55
Section 1245 Property	2-56
Treatment of Gain	2-56
Recapture on Real Property	2-56
Section 1250 Property	2-56
Pension Benefits	2-57
Qualified Domestic Relations Order	2-57
Taxation of Distributions	2-59
Deferred v. Present Division of Benefits	2-60
Deferred Division Arguments	2-60
Present Division or Alternate Property Arguments	2-60
Individual Retirement Arrangements	2-61
IRA Deduction Limit	2-61
Rollovers	2-62
Divorce Distributions	2-62
Amounts Not Rolled Over	2-62
Retirement Planning After Divorce	2-63
Social Security Benefits	2-63
Divorced Spouse Benefits	2-63
Divorced Widow(er) Benefits	2-64
Military Pensions	2-64
Divorced Spouse Benefits	2-65
Jurisdiction Requirement	2-65
Disposable Pay	2-65
Direct Payment	2-66
Divorced Widow(er) Benefits	2-66
Social Security Offset	2-67
Civil Service Pensions	2-67
Divorced Spouse Benefit	2-68
Divorced Widow(er) Benefit	2-68
Railroad Pensions	2-69
Divorced Spouse Benefit	2-70
Divorced Widow(er) Benefit	2-70
Bankruptcy	2-71

CHAPTER 3 - Spousal & Child Support3-1

Spousal Support & Alimony	3-1
Pre 2019 Decrees	3-2
#1 - Divorce or Separation Instrument - (§71(b)(1)(A))	3-2
Invalid Decree	3-2
Amended Instrument	3-2
Premarital Agreements	3-3
Voluntary Payments	3-3
Payments to Remarried Spouse	3-4
#2 Different Households - (§71(b)(1)(C))	3-4
Exception	3-4
#3 Termination at Death - §71(b)(1)(D))	3-5
Substitute Payments	3-5
#4 Payments Must Be In Cash - (§71(b)(1))	3-6
Payments to a Third Party	3-7
Written Requests, Consents, or Ratifications	3-8
Payments for Family Residence	3-11
Taxpayer-Owned Home	3-12
Spouse-Owned Home	3-12
Jointly-Owned Home	3-13
Mortgage Payments on Jointly-Owned Home	3-13
Taxes & Insurance on Jointly-Owned Home	3-13
Utilities	3-13
Rent On Property Owned by a Third Party	3-14
Payments for Life Insurance	3-14
Contingent Interest	3-14
#5 No Designation as Not Alimony - §71(b)(1)(B)	3-15
#6 Payment Cannot Be Child Support - §71(c)(1)	3-15
Past Due Child & Spousal Support Payments	3-15
#7 Joint Return Prohibited	3-16
2019 & Later Decrees – No More Alimony	3-16
Tax Treatment of Alimony	3-16
Instruments Executed Before 2019	3-17
Alimony Paid - Deductible	3-17
Reporting Alimony Received - Income	3-17
Alimony as Compensation	3-17
Recapture of Alimony	3-18
Exceptions to Recapture	3-18
Including the Recapture in Income	3-19
Deducting the Recapture	3-19
Exceptions	3-19
Computation	3-21
Alimony Substitution Trusts & Annuities	3-22
Annuities	3-23
Alimony Paid by an Estate	3-23
Instruments Executed After 2018	3-23
Child Support	3-28
Contingency Relating To the Child	3-28
Clearly Associated With a Contingency	3-28
Heller Case	3-29
Rebuttable Presumptions	3-29
COBRA Coverage	3-30
Coverage Termination	3-31
Notice	3-31
Election	3-31
Choice of Coverage	3-32
Cost	3-32
Deductibles	3-33
Qualified Medical Child Support Orders	3-33
Definition	3-33
Procedures & Duties	3-34
Jurisdiction	3-34

CHAPTER 4 - SELECTED MARITAL TAX ISSUES OUTSIDE OF DIVORCE4-1

Federal Income Tax	4-1
Marriage Penalty	4-1
Standard Deduction	4-2
Tax Brackets	4-2
Spousal & Companion Travel Expenses - §274(m)(3)	4-4
No Additional Cost Rule	4-5
Employee Exclusion of Spousal Travel Reimbursements - §132	4-5
Husband-Wife Partnerships	4-7
Qualified Joint Venture Election	4-7
One Spouse Employed by the Other	4-8
Federal Estate Tax	4-10
Dower & Curtsey - §2034	4-10
Community Property Comparison	4-10
Joint Interests - §2040	4-11
Qualified Joint Interest	4-11
Powers of Appointment - §2041	4-12
Ascertainable Standard	4-12
5/5 Power	4-13
Life Insurance - §2042	4-14
Incidents of Ownership	4-14
Community Property Issue	4-14
Marital Deduction - §2056	4-17
Outright to Spouse	4-17
Marital Deduction (QTIP) Trust	4-18
Qualified Terminable Interest Trust	4-18
Requirements	4-18
Net Value Rule	4-19
Non-Citizen Spouse	4-19
Gifts to Non-Citizen Spouses	4-21
Tax Basis for Estate Assets - §1014	4-22
Community Property Cost Basis	4-23
Business Interests - Death of a Spouse	4-23
Bypass Trust	4-23
Gift Taxes - §2501 to §2524	4-26
Gift Tax Computation	4-26
Calculation Steps	4-26
Applicable Exclusion - §2505	4-27
Application - §2501	4-27
Entity Rule	4-27
Split Gifts - §2513	4-28
Community Property States	4-28
Annual Exclusion	4-28
Per Donee/Per Year	4-29
Gifts in Excess of the Annual Exclusion	4-29
Gift Tax Marital Deduction	4-29
Nondeductible Terminable Interests	4-30
Social Security Survivors Benefits	4-30

Appendix A - Section 71 & Regs.A-1

Appendix B - Section 1041 & Regs.B-1

Appendix C - California Uniform Premarital Agreement ActC-1

Course Details

Author: Danny Santucci, J.D.

Danny earned his Bachelor of Arts in Political Science from the University of California at Irvine in 1969. He received his Juris Doctorate from Boalt Hall School of Law, University of California at Berkeley in 1972, at which time he began practice as a tax attorney in Southern California. His legal career was initiated with the business and litigation firm of Edwards, Edwards and Ashton. Later he joined the Century City entertainment firm of Bushkin, Gaims, Gaines & Jonas working for many well-known celebrities. In 1980, Danny established the law firm of Santucci, Potter and Leanders, in Irvine, California. With increasing lecture and writing commitments, Danny went into sole practice in 1995. His practice emphasizes business taxation, real estate law and estate planning. Danny has been an officer and active member in various organizations including the Glendale Bar Association, Century City Bar Association, Orange County and Los Angeles County Bar Associations, California State Bar Association, Toastmasters and Lions Club. He also avidly supports the American Association for the Advancement of Science. He has been admitted to practice before all California and federal courts including the United States Tax Court and the United States Supreme Court. Serving as a lecturer for the Continuing Education of the Bar of California, Golden Gate University, and numerous state C.P.A. societies, Danny teaches a variety of tax, business and real estate courses. Danny has been in demand all across the country as a speaker for all levels of professional and civic organizations and numerous major seminar circuits. Danny spoke to over 2,000 people per month and traveled more than 150,000 miles annually. In 2015, he withdrew from the lecture circuit to devote himself to tax research and writing. The author of numerous texts, he is listed in "Who’s Who in Creative Real Estate" and is admitted to the American Exchangor’s Hall of Fame.

Publication/Revision Date: 4/3/2026

Course Exam Questions (online): 120 (multiple-choice)

Program Delivery Method: Self-Study (NASBA QAS Self-Study)

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None
CFP®	Intermediate	Familiarity with federal taxation	None
CDFA®	Intermediate	Familiarity with federal taxation	None
EA/OTRP	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

CFP Board Sponsor I.D.: 1008 — Course I.D.: 195326

Registered with the Institute for Divorce Financial Analysts

IRS Qualified Sponsor I.D.: FWKKO — Course I.D.: FWKK0-T-00770-26-S

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

Chapter 1: Basic Marital Tax Matters

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Specify the factors used to determine federal filing status and the effects of filing as married or unmarried.
Identify the requirements for filing a joint return and how to avoid being penalized.
Determine the key elements of filing separate returns, including what items to report and identify whether or not married taxpayers should file separate returns.
Cite the requirements for filing as head of household and the tax advantages and disadvantages of this filing status.
Recognize the repeal of personal & dependency exemptions, their former phaseout, availability, and reporting requirements.
Differentiate custodian and noncustodian parent, identify the dependency determination impact, determine the current "qualified child" standard using residency, and identify requirements that must be met for parents to treat a child as a qualifying child of a non-custodial parent.
Identify deductible and nondeductible divorce expenditures, specifying which spouse is subject to tax imposed upon withheld wages, and recognize the effects of making separate estimated tax payments or joint declarations of estimated tax.
Determine community property and the community property states, identify the effects of conversion and commingling of property, and how to avoid such marital property issues.
Identify community income earned by married couples for reporting purposes by:
1. Specifying reporting guidelines, recognizing the allocation of income and what income and property belong to which spouse when they have different residency statuses;
2. Recalling the requirements for the special community income allocation rules of §66(a), determining what constitutes community property termination and specifying the treatment of alimony payments versus community share; and
3. Recognizing the use of statements and records to provide estimates of a former spouse's income and identifying conditions for greater tax relief.
Identify the effect of living together on filing statuses and dependency, determine differences between the married tax rate and other tax rates, recognize the tax consequences of having a living together contract to avoid tax traps, and specify the results of Marvin v. Marvin.

After studying the materials in Chapter 1, answer exam questions 1 to 30.

Chapter 2: Transfers Incident to Divorce

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify types of marital property and their likely division in marital property settlements and specify the legal principles used in dividing assets and providing support on divorce or separation.
Determine the benefits of premarital agreements and the requirements and permissible provisions for a valid and comprehensive agreement under the Uniform Premarital Act.
Specify the position of U.S. v. Davis on interspousal transfers and the changes made by §1041, and identify the requirements of §1041 and the scope of its application.
Select factors that determine whether a property transfer is incident to divorce and identify how to meet these factors or avoid §1041 altogether when desired.
Determine the application of §1041 to transfers in trust under §1041(e) and to third-party transfers on behalf of a spouse or former spouse.
Recognize deferred tax liability by identifying the property basis for the transferor spouse and transferee spouse under §1041 after a property settlement.
Specify the application of §1041 to property transfers where the transferee assumes liabilities encumbering the property, and the obligation to supply basis information.
Recognize the dangers of purchasing a former spouse's interest in property, particularly a marital residence and its tendency to create deferred tax liability.
Determine tax effects of purchasing an interest in personal or real property used in a business or held for investment, recognize potential recapture, and identify the use of a §1031 exchange to dispose of low-basis property received in a §1041 transfer.
Specify common disposition alternatives available on divorce and identify the home sale exclusion requirements and the tax treatment and use of installment.
Recognize sale, redemption, recapitalization, liquidation, and third-party transfers as methods of dividing a business in a marital settlement, citing unique provisions under §302, §736, and §754.
Identify whether gain or loss on a sale of real or personal property is capital or ordinary and recognize the tax treatment of such gain or loss and the role and tax treatment of life insurance in property settlements.
Specify popular methods of dividing private and military retirement benefits in a divorce or separation action, identifying the requirements and tax consequences of a "qualified domestic relations order (QDRO).

After studying the materials in Chapter 2, answer exam questions 31 to 69.

Chapter 3: Spousal & Child Support

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Recognize how the tax treatment of spousal support payments has dramatically changed under the TCJA, identify the §71 requirements for pre-2019 decree alimony, and differentiate the tax treatment from current law.
Identify the tax treatment of child support and circumstances where a payment will be fixed as child support, and specify events that determine whether a contingency is clearly child-related and how to rebut this presumption of child support.
Recognize the COBRA and qualified medical child support order rules by:
1. Identifying whether COBRA rules apply to different plans, including notice & deadline requirements and specifying situations that may result in a termination of continuing coverage; and
2. Determining what constitutes "qualified medical child support orders," recognizing differences with other similar orders and identifying the procedures, requirements, and jurisdiction of QMCSOs.

After studying the materials in Chapter 3, answer exam questions 70 to 99.

Chapter 4: Selected Marital Tax Issues Outside of Divorce

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify the marriage penalty and marriage bonus associated with filing a joint return by recognizing how standard deductions and tax brackets have differed over time.
Determine the tax treatment of spousal travel, including additional cost limitations and identify the benefits of husband and wife partnerships, particularly with regard to Social Security qualification.
Recognize the application of federal estate tax on couples and where estate planning may be necessary as a result of marital status.
Specify the treatment of co-tenancies with or without a right of survivorship, identifying qualified joint interests, recognize the impact on the value of a general power of appointment, determine what insurance proceeds are included in the gross estate because of incidents of ownership, and cite the community property issue involved with ownership of life insurance.
Determine the impact of the marital deduction on the gross estate, recognizing outright transfer methods and specify the use of a "marital deduction (QTIP) trust" and a "qualified terminable interest trust."
Identify marital deduction variables, including deduction limitations and specify the federal income tax treatment and gift tax treatment of non-citizen spouses.
Recognize the effect common transactions and community property have on §1014 property basis and the benefits of a bypass trust specifying its effect on the marital deduction.
Determine the purposes of the federal gift tax, identifying its computational methods and applicable exclusions, specify the advantages of splitting gifts and the gift tax marital deduction, recognizing dangers as to "excess" gifts and terminable trusts, and identify Social Security eligibility for family members of a system participant.

After studying the materials in Chapter 4, answer the exam questions 100 to 120.