Following up on yesterday's post, NY Times: For Wealthy Americans, There Will Never Be A Better Time To Get Divorced Due To New GOP Tax Law: Tax Prof Blog op-ed: The 2017 Tax Act's Fascinating Change to the Tax Consequences of Alimony, by Bret Wells (Houston):
The act repealed §61(a)(8) that included alimony as part of the enumerated listing of items of gross income, but the listing is not exhaustive. The flush language of §61(a) includes in gross income all income from whatever source derived.
So, under general principles, is alimony income from whatever source derived?
The legislative history cites Gould v. Gould and says that alimony is not taxable under general principles. But, that 1917 decision pre-dates the Supreme Court’s later and a more modern formulation of gross income as articulated in Glenshaw Glass. In addition, at a fundamental level, Gould v. Gould is inconsistent with United States v. Davis. If Davis announced "general principles" and is only supplanted to the extent of the subsequent statutory enactment of Section 1041, then does Davis impliedly negate Gould v. Gould?
In the end, I take it that alimony is not income because the legislative history to the 2017 Tax Act says so, but that seems to put a lot of emphasis on legislative history over statutory text that actually appears in the Code.
To me, the better answer would have been for Congress to have enacted a statutory provision that specifically says that alimony is excluded from gross income for the recipient if that is what was intended by the change in law.
In the end, from a statutory perspective, it appears to me that the statute is silent on alimony in terms of whether the recipient has gross income upon its receipt. The removal of old Section 61(a)(8) doesn’t move the analysis forward given the flush language of Section 61(a) and given the fact that the enumerated provisions are a non exhaustive listing. In this context, the legislative history’s reliance on a pre-Glenshaw Glass decision from 1917 as the basis for excluding alimony was not the best way to signal that alimony is nontaxable to the recipient.