By now you’ve seen the clip. A kiss cam at a Coldplay concert outside Boston zoomed in on a couple enjoying a night of yellow lights and “Viva La Vida.” Except it turns out they weren’t just anyone. They were both high-level execs at the same company. Both married. Just not to each other.
Yikes!
The fallout came fast. The CEO resigned just three days later. The company is doing damage control. And the tax consequences may be just warming up.
We’re not here to pile on. Divorce is a deeply personal tragedy, especially for innocent spouses and children. So we’ll leave the snark to Twitter and the breakup ballads to Coldplay. What we will do, however, is look at what happens when an affair goes from private misstep to public resignation — and how the IRS sings backup in the financial aftermath.
If those marriages don’t survive, let’s talk alimony. Before the 2017 Tax Cuts and Jobs Act (TCJA), alimony payments were deductible by the payor and taxable to the recipient. In the eyes of the IRS, that made sense: the person actually keeping the income picked up the tax.
But TCJA changed the game. For divorce or separation agreements signed after December 31, 2018, alimony is no longer deductible to the payor or taxable to the recipient. Translation? If our soon-to-be-former execs write the checks, they’ll do it with after-tax dollars — and their exes will receive those payments tax-free. It’s like paying tax on a tip you weren’t allowed to keep.
One silver lining? Property transfers between spouses (or ex-spouses) incident to divorce are generally not taxable events under IRC §1041. That means you can hand over the house, the boat, or even the Coldplay tickets (assuming anyone still wants them) without triggering capital gain.
Just be careful. That “incident to divorce” part has a shelf life. The transfer has to happen within one year of the divorce or be clearly laid out in the divorce instrument. Miss those marks, and the IRS might show up like a breakup song at karaoke — off-key and unwelcome.
And here’s the kicker: while the transfer itself isn’t taxable, whoever gets the property takes it with something called carryover basis. So if you give your ex a beach house with a $3 million value and a $300,000 basis, they get the pleasure of paying tax on that gain when they sell. “Conscious uncoupling,” now with capital gains!
Then there’s the CEO’s resignation. If he’s paying legal fees to negotiate it, those costs are almost certainly not deductible anymore. Before TCJA, some employment-related legal fees might qualify as miscellaneous itemized deductions. But TCJA eliminated all miscellaneous itemized deductions through 2025. So, unless he’s being reimbursed by the company (and that brings its own tax drama), he’s footing that bill entirely out of his own pocket. Let’s hope HR tossed in a Coldplay box set to soften the blow. (Oh, wait . . . . )
The concert incident may have been a 10-second clip, but the fallout will last years — and not just for the people involved. It’s a reminder that in the unlikely Venn diagram of executive compensation, marital finances, and public scandal, the IRS sits squarely in the center.
None of this is fun to contemplate. But if you ever find yourself going through a divorce, bring in professional help early. We’re not here to judge, and we don’t need the soap opera details. We just want to make sure you don’t lose more to taxes than you have to. And next time you’re at a concert, maybe skip the kiss cam. The IRS may not be watching, but someone else probably is.