Capital gain distributions (those found in Box 2a, Form 1099-DIV) are treated as long-term capital gains regardless of the period of time the shareholder owned an interest in the fund. Long-term capital gains are generally taxed at different rates than short-term gains and other ordinary income, and the several types of capital gain (such as those found in Boxes 2b, 2c, and 2d on Form 1099-DIV) are themselves taxed at different tax rates.
ALIMONY
Alimony is a payment made to a person by court decree as a result of divorce or separation. If the taxpayer is receiving taxable alimony, it's included in income on line 11, Form 1040. Payment of taxable alimony is deducted by the payer as an adjustment to income on line 31a, Form 1040. Enter the recipient's social security number in the space provided next to line 31a.
Qualifications
If alimony is deductible by the person who pays it, it is taxable income to the person who receives it. The rules governing whether alimony is deductible by the payer and taxable to the recipient depend on when the divorce or separation agreement was established. The rules discussed here apply to divorce and separation agreements established after 1984. If you ever need to know the rules for agreements established prior to 1985, you'll need to do some research.
COMMUNITY PROPERTY STATES
In community property states, payments to a separated spouse (as opposed to a divorced spouse) are deductible only when the amount exceeds the spouse's share of the community property income; for example, if the spouse's share of community property income is $20,000, and the alimony received and the remaining $20,000 is reported as other gross income. Only $2,000 is deductible by the spouse paying the alimony.
Payments That Are Not Alimony
The term alimony may be used in a decree to describe payments that do not meet the tax deductible requirements of alimony. Property settlements, payments not required by the decree or agreements, and payments not arising from the marital relationship (for example, a bona fide loan from one spouse to the other spouse)
CHILD SUPPORT
Payments that are specifically designated in the decree or agreement as support for minor children are child support and not alimony. These payments are neither deductible by the payer nor taxable to the recipient.
Sometimes amounts not specifically stated in the decree to be child support will nonetheless be treated as child support. This happens when payments are reduced or eliminated upon the occurrence of a contingency relating to the child, or at a time that is clearly associated with the contingency.
Example: Peter Simson's divorce decree states he will pay his ex-wife $500 per month until their son reaches age 21. Although the divorce decree does not specifically state that the $500 per month is child support, it will be so treated because it will cease upon the contingency of the son's 21st birthday.
When the divorce decree does not set a specific amount for child support, and no child-related contingencies are involved, the entire payment is alimony.
Example: Rolly and Gina Martin are divorced. Gina has custody of the couple's two children. Their divorce decree states only that Rolly will pay Gina $1,500 per month. Because the decree does not stipulate a specific amount as child support, and no child-related contingencies are involved, the entire amount is considered alimony.
When alimony and child support payments are both required by a decree, child support is always considered to be paid first.
Example: A taxpayer is required to make payments of $900 per month until the death or remarriage of his spouse. The decreed designates $600 pf this amount as alimony and $300 as child support. The taxpayer sends only $9,000 in total payments for the year. The alimony deduction for that year is $5,400 because the $3,600 designated as child support by the decree is considered to be paid first.
On occasion, alimony may include the payment of expenses of a personal residence, such as real estate taxes, insurance, interest, and utilities. The facts in each situation determine the amount deductible by one spouse and taxable to the other spouse.
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