{"id":293,"date":"2025-07-22T23:07:26","date_gmt":"2025-07-22T23:07:26","guid":{"rendered":"https:\/\/www.bourbonnaistax.com\/blog\/?p=293"},"modified":"2025-07-22T23:07:26","modified_gmt":"2025-07-22T23:07:26","slug":"sparks-just-got-pricey","status":"publish","type":"post","link":"https:\/\/www.bourbonnaistax.com\/blog\/sparks-just-got-pricey\/","title":{"rendered":"Sparks Just Got Pricey"},"content":{"rendered":"
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By now you\u2019ve 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\u2019t 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\u2019re not here to pile on. Divorce is a deeply personal tragedy, especially for innocent spouses and children. So we\u2019ll leave the snark to Twitter and the breakup ballads to Coldplay. What we\u00a0will<\/em>\u00a0do, however, is look at what happens when an affair goes from private misstep to public resignation \u2014 and how the IRS sings backup in the financial aftermath.

If those marriages don\u2019t survive, let\u2019s 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\u00a0or<\/em>\u00a0taxable to the recipient. Translation? If our soon-to-be-former execs write the checks, they\u2019ll do it with after-tax dollars \u2014 and their exes will receive those payments tax-free. It\u2019s like paying tax on a tip you weren\u2019t allowed to keep.

One silver lining? Property transfers between spouses (or ex-spouses)\u00a0incident to divorce<\/em>\u00a0are generally\u00a0not<\/em>\u00a0taxable events under IRC \u00a71041. 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 \u201cincident to divorce\u201d 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 \u2014 off-key and unwelcome.

And here\u2019s the kicker: while the transfer itself isn\u2019t taxable, whoever gets the property takes it with something called\u00a0carryover basis<\/em>. So if you give your ex a beach house with a $3 million value and a $300,000 basis,\u00a0they<\/em>\u00a0get the pleasure of paying tax on that gain when they sell. \u201cConscious uncoupling,\u201d now with capital gains!

Then there\u2019s the CEO\u2019s resignation. If he\u2019s paying legal fees to negotiate it, those costs are almost certainly\u00a0not<\/em>\u00a0deductible anymore. Before TCJA, some employment-related legal fees might qualify as miscellaneous itemized deductions. But TCJA eliminated\u00a0all<\/em>\u00a0miscellaneous itemized deductions through 2025. So, unless he\u2019s being reimbursed by the company (and that brings its own tax drama), he\u2019s footing that bill entirely out of his own pocket. Let\u2019s 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 \u2014 and not just for the people involved. It\u2019s 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\u2019re not here to judge, and we don\u2019t need the soap opera details. We just want to make sure you don\u2019t 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

By now you\u2019ve 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\u2019t just anyone. They were both high-level execs at the same company. Both married. Just not to each other.<\/p>\n","protected":false},"author":2,"featured_media":294,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[90,3,91],"tags":[214,218,217,216,213,215,223,222,221,80,61,220,219,212],"class_list":{"0":"post-293","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-tax-cuts-and-jobs-act","8":"category-taxes","9":"category-tcja","10":"tag-alimony","11":"tag-carryoverbasis","12":"tag-coldplayscandal","13":"tag-divorcetaxstrategy","14":"tag-executivecompensation","15":"tag-irsdrama","16":"tag-legalfees","17":"tag-maritalfinances","18":"tag-publicscandal","19":"tag-taxplanning","20":"tag-taxtips","21":"tag-tcja","22":"tag-wealthstrategy","23":"tag-weeklytaxbeat","24":"entry"},"_links":{"self":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/293","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/comments?post=293"}],"version-history":[{"count":1,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/293\/revisions"}],"predecessor-version":[{"id":295,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/posts\/293\/revisions\/295"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/media\/294"}],"wp:attachment":[{"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/media?parent=293"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/categories?post=293"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bourbonnaistax.com\/blog\/wp-json\/wp\/v2\/tags?post=293"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}