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Monday, July 30, 2012

Keeping Up With the Kardashians' Taxes

PhotpHuffington Post:  Kim Kardashian and Kris Humphries: Trouble at Tax Time?, by Julian Block:

Picture a cozy household of three -- Brad Pitt, Angelina Jolie and the friendly tax man. Fact is, whether Brad, Angelina, Jennifer, Bristol, Levi, Snooki, or anyone else is hooking up, breaking up, or something in between, the odds and ends of their relationships are grist for the Internal Revenue Service mill.

Consider, for example, the splashy wedding of reality TV personality Kim Kardashian (her second marriage) to basketball player Kris Humphries (his first). They wed on August 20, 2011. Seventy two days later, Kim filed for divorce. Kris countered by seeking an annulment on the grounds of fraud (the case is still pending).

The difference between a divorce and an annulment isn't a difference without a distinction. The courts grant a divorce to mark the end of a marriage that was valid when entered into, whereas they grant an annulment to end a marriage that was void or voidable. A marriage is void when it legally couldn't have taken place -- like when one of the parties was under the age of consent at the time of the marriage or already married. Voidable is legalese for incapable of consenting -- for example, one of the parties was intoxicated or the victim of behavior like duress, coercion or force.

To a couple interested only in the fastest way to untie the knot, the question may seem to be an unimportant technicality. Those watchful souls at the IRS, however, think that there's an important difference when Form 1040 time rolls around. According to an IRS ruling, if an annulment is retroactive, the couple was never married. As a result, they had no right to file joint returns [Rev Rul. 76-255, 1976-2 CB 40].

(Hat Tip: Francine Lipman.)

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