I have to say that I love the tax world. And, the more that I delve into this environment the more I find something new. Sometimes what I find makes me shake my head and laugh. This is one of those times.
I was recently reading some Tax Court cases (yes, I do that type of thing) when I came upon this soap opera. Oh wait-a-minute, this actually happened.
The end result of this particular case was that payments that a woman received for agreeing to be faithful to her boyfriend are taxable.
So, in a nutshell, after dating for about a year, a couple pledged their fidelity to each other in writing. The “agreement” required him to pay her $400,000 (yes, you read that correctly). Later, he accused her of cheating. They broke up, and he sued her. He also filed tax form 1099-MISC, reporting the payment. A state court found that she defrauded him and required her to repay the $400,000. Still, the tax Court said that she owes tax on the amount. Ouch!
The case is Blagaich v. Commissioner of Internal Revenue and you can read that case here.
Please folks, if you get nothing else from this case, just realize that money and property transactions can have a tax impact on you even when you don’t think that there can be any tax implications resulting from that transaction.
So, before you engage in an any event involving money or property speak with a qualified tax professional.
Bruce – Your Host at The Tax Nook
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