Child Tax Exemptions, Deductions & Divorce

February 28, 2017

taxes-and-1040

Q: What is a dependent exemption?

  • As applied to your child, the dependent exemption is an amount of money that you are permitted to subtract from your adjusted gross income. The dependent exemption reduces the amount of income on which you will be taxed (in effect, an exemption operates the same as a deduction).
  • In 2016, the dependent exemption is $4,050 per child. The right to claim exemptions, however, phases out at higher income levels. In 2016, the phase-out begins at $259,400 for single parents and $285,380 for single parents who claim head of household status.

Q: How is the right to claim a child’s dependent exemption determined in a divorce situation?

  • Only one parent may claim a dependent child on his or her tax return in any given year. The parent who claims that child as his or her dependent is also the parent who claims that child’s dependent exemption.
  • According to the IRS, the default parent, in terms of claiming the dependent exemption for a child in a divorce situation, is the one with whom the child lives for greater than 50% of the time during that tax year. (Note: The IRS refers to the parent with whom their child lives for greater than 50% of the year as the “custodial parent.”)
  • In 50%/50% custody situations, the default parent is the parent with the higher adjusted gross income.

 

Q: Can the non-custodial parent ever claim a child’s dependent exemption on his or her tax return?

  • If the divorcing parents agree that the child’s dependent exemption may be claimed by the non-custodial parent, the IRS will allow this.
  • Such an agreement should be clearly stated in the parents’ Property Settlement Agreement (PSA) and Final Order of Divorce/Divorce Decree.
  • The custodial parent will need to complete and sign IRS Form 8332 each and every year that the non-custodial parent is permitted (by the PSA) to claim that child’s dependent exemption. The non-custodial parent must attach this form to his or her tax return every year that he or she claims that child’s dependent exemption.
  • Parents also have the option of alternating their child’s dependency exemption on an every-other-year basis, or as they otherwise agree.

 

Q: Are there other tax benefits that are attached to the child’s dependent exemption?

  • The parent who claims the child’s dependent exemption is also the parent who is eligible for the child tax credit (if applicable, depending on the parent’s income).
  • The parent who claims the child’s dependent exemption is also the parent eligible to claim that child’s educational tax credits, also known as college credits and, as of 2015 the American Opportunity Credit (if applicable, depending on the parent’s income and other factors)

 

Q: Are there tax benefits that remain with the custodial parent (despite the non-custodial parent claiming that child’s dependent exemption)?

  • The custodial parent remains the only parent eligible to claim the earned income tax credit.
  • Also, only the custodial parent (not necessarily the parent who claims that child’s dependent exemption) is eligible to claim the child and dependent care tax credit (also known as the day care credit).
  • Note: The same rules apply if a parent is eligible, through his or her place of employment, for a Flexible Spending Account (FSA).
  • If the parents share the child’s custody 50%/50%, the IRS defaults to the parent with the higher adjusted gross income, i.e., the parent with the higher adjusted gross income is treated as if he or she is the “custodial parent.”
  • In 50%/50% custody situations, parents often negotiate which one will have the custodial parent benefits for income tax purposes (as opposed to letting the IRS default dictate the outcome).
    • This is custom, but not specifically addressed by the IRS.
    • The IRS reasoning: There are 365 days in a year (an odd number). Therefore, a true 50%/50% custody share is impossible.
    • NOTE: Only one parent may claim the earned income tax credit and the child and dependent care tax credit.

 

Q: Which parent is eligible to file as Head of Household?

  • A parent who is single and has a dependent child living in his or her home may be eligible to file taxes as “head of household.
  • Only the custodial parent – the parent who cares for the child greater than 50% of the time – is eligible to file his or her taxes as head of household.
  • Unlike the dependent child exemption, the right to file as head of household is not exchangeable between parents.
  • The head of household tax status, versus filing as “single,” often lowers your tax bill (but phases out at higher income levels).
    • Head of household status often lowers your tax rate, thereby lowering your tax bill. .
    • If you claim the standard deduction (versus itemizing your deductions), that number will be higher, thereby lowering your tax bill.
  • The specific criteria follows:
  • Your spouse did not live in your home for the last 6 months of the year for which the taxes are filed (this applies to parents who are separated, but not yet divorced).
  • You will not be filing a joint return with your spouse (this applies to parents who are separated, but not yet divorced).
  • You paid over half the cost of maintaining your home for that tax year.
  • Your child lived in your home over half the year, i.e., you are the “custodial parent” (even if the other parent claims that child’s dependency exemption).
  • Your child is considered a “qualifying child”, meaning he or she has not turned 19 by the end of the tax year (if not a full-time student), or is younger than 24 at the end of the tax year (if a full-time student for at least 5 months during the tax year), or is permanently disabled.
  • In 50%/50% custody situations, parents often negotiate which one will have the right to file as head of household (as opposed to letting the IRS default – that only the custodial parent is permitted to file as head of household – dictate the outcome).
    • This is custom, but not specifically addressed by the IRS.
    • The IRS reasoning: There are 365 days in a year (an odd number). Therefore, a true 50%/50% custody share is impossible.
    • NOTE: Only one parent may file as head of household (as it related to a child).
    • With more than one child, in a 50%/50% custody situation, parents sometimes each care for a child greater than 50% of the time and, as a result, each parent is potentially eligible to file their taxes as head of household.

 

Q: At what age is a child no longer considered a “dependent”

  • To qualify as a dependent, your child must be under the age of 19 on December 31 of the tax year in question.
  • However, if your child is a full-time student (as defined by his or her school), he or she may be your dependent for income tax purposes as long as he or she is under the age of 24 on December 31 of the tax year in question.
  • If your child is permanently and totally disabled, there is no age limit.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Child Custody In a Virgina Divorce: Legal Custody & Physical Custody Defined

June 9, 2015

child custodyWhen discussing various parenting arrangements with clients and prospective clients, I have learned that most people who are in the midst of a divorce/separation, or are contemplating such an event, make similar mistakes when it comes to Virginia “custody terminology”.

Such vocabulary faux pas are hardly indicative of a parent’s heartfelt desire to spend time with his or her child.  However, it is usually helpful to clients when they begin to get a handle on how the Commonwealth of Virginia goes about assigning labels in the context of divorce and co-parenting.  (Co-parenting refers to any situation when two parents are raising a child, in two separate households, whether or not those parents were ever married).

Of course, your mediator or divorce lawyer should certainly be able to figure out what you mean – no matter how you phrase it – when it comes to your desires for your child’s future parenting arrangements.  Not all mediators or divorce lawyers, however, do a good at explaining legal terminology.  The same goes for clients’ ability to absorb and process information in such a stressful and confusing time.

As a result, I have seen plenty of post decree (after divorce) situations where basic misunderstandings of the custody terms in the parties’ Final Order of Divorce (aka Divorce Decree) kept them fighting about their child several years after their separation and divorce.

To help alleviate this unfortunate and rampant misinformation about various custody terms in Virginia child custody cases, here is my “Virginia Custody Dictionary.”

Legal Custody:

Determines which parent has the right to make major decisions concerning their child.  Legal custody has nothing to do with where the child lives.

There are two types of Legal Custody:

    (1) Joint Legal Custody –  

        Major decisions must be agreed to by the parents.

    (2) Sole Legal Custody –

        Major decisions need only be made by the parent who is granted Sole Legal Custody.

  • The term “Legal Custody” is not intuitive to most people and problems often arise, down the road from when the settlement agreement is signed/Court order is entered, over the parents’ often diametrically opposite interpretation of the term “major decisions”.
  • Mediators encourage clients to jointly define the term “major decisions,” as part of the settlement of the custody issues in their particular case, to help save them from possible trouble down the road.
  • On the other hand, divorce lawyers tend not to focus on crafting an agreed client-interpretation of the term “major decisions”. Instead, they leave it up to the Courts to decide, should there be a problem in the future, whether a decision made, or to be made, by a parent is, in fact, “major”.  Ultimately, the Courts do have final decision-making power; but, a meeting of minds between parents is usually enough to end bitter battles before they start.
  • Examples of “Major Decisions” – Those decisions which are generally agreed by divorce lawyers and courts to be “major decisions”:
  1. Which school the child will attend;
  2. Whether the child will be required to undergo an elective medical procedure (e.g. plastic surgery on a scar);
  3. Whether braces will be placed on a child’s teeth for purely cosmetic reasons;
  4. Whether a child will be required to engage in psychotherapy;
  5. Who will be the child’s substitute caretaker necessary for the parents to earn a living (known as “work related childcare”, aka WRCC); and
  6. Choice of sleep-away camps.
  • Examples of “Gray Area Decisions” – Where decisions may or may not be considered “major”:
  1. Which week or two-week long camp a child will attend in the summer (not sleep-away camps);
  2. Which extracurricular activities a child will participate in during that parent’s custodial care time.
  3. Whether a child will participate in a specialized academic program during school hours (remedial or enhanced learning);
  4. Whether a child will participate in various in-school clubs, groups and activities;
  5. Choice of classes (middle school and high school);
  6. Choice of basic disciplinary techniques;
  7. Choice of how much to give a child for allowance/spending money; and
  8. Choice of vacation destinations with children (within reason);
  9. Choice of children’s playmates.

Physical Custody:

Determines where the child will live and the amount of time the child will spend with each parent.

Physical custody pertains to which parent (sometimes both, sometimes only one) has the primary responsibility for the care and control of the child on a given day.

  • Day to day decisions, of a routine nature, are made by the parent with whom the child is being cared for on that day.

 

Sole Physical Custody:

  • In Sole Physical Custody situations, that parent is granted all (or almost all) of the custodial care rights and responsibilities for the child.
  • The other parent is not usually involved in day-in-and-day-out responsibilities that come with raising a child.
  • The other parent is usually permitted “visitation” with his or her child (except in cases where that parent would present a danger to the child);
  • In Virginia, even in cases where one of the parents is granted Sole Physical Custody, the other parent still has the legal right to review the child’s medical and academic records (with exceptions);
  • To add to the confusion, when calculating Virginia Child Support Guideline Obligations, the “regular” calculation is called the “Sole Child Support Calculation”.  This poorly named calculation simply means that the non Primary Custodian cares for the children fewer than 91 days per year,2  even though the caretaking duties may clearly be shared between the parents.
  • Advocating for the denial of a parent to be involved in major decisions concerning his or her child is serious. It generally means that there is something very wrong with one or both of the parents’ ability to care for the child and/or use sound judgment when making decisions concerning the child.
  • In cases where one or both of the parents thinks that a child should have no or very little custodial care time with the other parent, it is often advisable that those parents litigate (hire a divorce attorney) and not mediate their cases.

Shared Physical Custody:

  • In Shared Physical Custody situations, it is presumed that both parents are involved, to a much greater extent than in a “Sole Custody” situation, in the day-in-and-day-out responsibilities that come with raising a child.
  • However, Shared Physical Custody does not, necessarily, mean 50/50.  It does, however, mean that there is a discernible sharing of parental caretaking duties for the child.
  • The term “Shared Physical Custody” is not clearly defined in Virginia law in terms of custody and parenting arrangements.
  • To add to the confusion, when calculating Virginia Child Support Guideline Obligations, there is a special calculation available for situations where a “non-primary custodian” cares for a child 91 or greater days per year.  That calculation is called the “Shared Child Support Calculation.” The Virginia Shared Child Support Calculation is able to accommodate various ratios of caretaking duties (e.g. 50/50 custody, 60/40 custody, etc.).

Primary Physical Custody:

  • The parent who is the “Primary Physical Custodian” is usually the parent who cares for the child greater than 50% of the time.
  • The term “Primary Physical Custodian,” however, is not well-defined in Virginia law.  There are situations where parents have less than a 50/50 custody share (exp. 60/40, 70/30), but where a settlement agreement/Court Order show that the custodial care plan is “Shared Custody” (even though there is, by most standards, a “primary parent”).
  • Some divorce attorneys are concerned that a judge may allow a parent, who is referred to as the “Primary Custodian,” in the settlement agreement/Court Order, to have more potential influence in possible future battles involving the child (e.g., moving away with the child).
  • If a parent is referred to in a settlement agreement/Court Order as the “primary custodian,” a school district may defer to that document when determining which school a child should attend.  (See previous Blog article: https://fairfaxdivorceblog.com/?s=prince+william )

In certain situations, and if there is no tax planning as part of the parties’ settlement, The IRS automatically awards certain child-related tax benefits to the “Custodial Parent”.  The IRS does not use the term “Primary Parent”.  The “Custodial Parent,” in terms of tax law, is the parent who cares for the child greater than 50% of the time during that tax year.  If the settlement agreement/Court Order conflicts with the actual caretaking schedule, this could present a problem if both parents wish to claim the child as their dependent exemption. This is not a problem, however, if parents insure that the settlement agreement/ Court Order matches their actual caretaking activities and if they make sure that tax planning is a part of their settlement (as it should be). (See previous Blog article https://fairfaxdivorceblog.com/?s=tax+custody )

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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When Should Married Couples Check ‘Married, Filing Separately’?

March 1, 2015

Graine Mediation is pleased to introduce Julian Block, JD as our guest blogger this week.  Mr. Block is a leading authority on tax planning for divorce and the author of Julian Block’s Tax Tips for Divorce, from which this article is an excerpt.

alg-taxes-irs-jpg

Married couples need no reminder that they can benefit from joint filing when one mate earns all or considerably more of the income than the other. That tax break, though, can become a trap for spouses who decide to split, but don’t obtain a divorce or a legal separation. They still have the option to file jointly, assum­ing both partners are willing to do so. Nevertheless, one or both might find it more advantageous to file separately. The financial implications are huge.

Among other drawbacks for joint filers: they’re jointly and severally liable. That means married persons remain on the hook even if their marriage breaks up after they file a joint return. So if the IRS audits their return and demands extra taxes, it can dun either mate for the entire amount of any additional taxes, penalties and interest that becomes due.

Nevertheless, there are some drawbacks to filing separately. Whatever a couple’s reasons for avoiding tax togetherness, the two of them may be in for an unpleasant and expensive surprise when filing time rolls around. The taxes they’ll pay as married persons filing separately can be considerably more than the taxes they’d owe as joint filers or even as two unmarried persons.

There are other drawbacks for married persons who choose to file separately. One is that both of them must use Schedule A of Form 1040 to itemize their deductions for charitable donations and the like or that both must use the standard deduction.

Special rules for married persons living apart. Fortunately, there’s a way out of these traps for many married persons. An often overlooked break entitles them to be treated as if they were unmarried for the year in question—provided they fulfill certain requirements. The result: Even though they aren’t divorced or legally separated, they’re excused from having to use the rates for a married individual filing separately and, instead, receive the benefit of the more favorable rates for a head of household.

To take advantage of head of household rates, you have to pass a four-step test.

  •  Step 1: You file a separate return from your spouse.
  •  Step 2: Your spouse didn’t live with you at any time during the last six months of 2014. You and your spouse must live in separate residences, warns the IRS, and the courts agree. The Tax Court has ruled that a hus­band failed to qualify as a head of household when he and his wife agreed to live in separate areas of the same residence. Thus, living apart under one roof doesn’t pass muster.

In another dispute, the court reminded Laurel Hopkins that sharing the same quarters for as little as one day during the last six months of the year can be fatal. Before more than six months had elapsed during the year at issue, Laurel and her husband, William, had ceased to live together; but during the balance of the year, she sometimes let William stay overnight be­cause he was unable to find a dwelling.

As she paid all the household bills and was the sole support of their two children, Laurel, not unrea­sonably, believed herself entitled to file as a head of household. Unfortunately, in the course of a subse­quent IRS audit, Laurel let slip that William sometimes stayed in her apartment. On the basis of that admission, the feds determined that Laurel’s proper filing status was that of a married person filing separately. Though sympathetic to Laurel’s predicament, the Tax Court agreed with the IRS that a wife who shelters a homeless husband at any time during the last six months of the year disqualifies herself for head of household status.

 To avoid getting caught in an audit trap like Laurel, don’t chat yourself into loss of a tax break. Confine your answers to the questions raised.

  •  Step 3: You paid more than half of the cost of keeping up your home for 2014.
  •  Step 4: Your home was, for more than half of 2014, the principal residence of your child, stepchild or adopted child, whom you can claim as a dependent.

You aren’t necessarily disqualified from filing as a head of household just because you’re unable to claim the child. As the parent with custody—the mother, in most cases—you continue to be eligible, if you sign IRS Form 8332, which allows the 2014 exemption to be claimed by your spouse, the parent without custody.

When couples live apart by mutual agreement, they might be able to work out an arrangement whereby each spouse can claim a dependent child and each qualifies as a head of household. Congress enacted this special provision that treats married persons as unmarried individuals primarily for the benefit of abandoned wives (or husbands). But it worded the provision broadly enough to cover couples who have separated and who live apart by mutual agreement—without any actual abandonment.

Julian Block writes and practices law in Larchmont, N.Y. and was formerly with the IRS as a special agent (criminal investigator) and an attorney. He is frequently quoted in the New York Times, the Wall Street Journal, and the Washington Post, and has been cited as: “a leading tax professional” (New York Times); “an accomplished writer on taxes” (Wall Street Journal); and “an authority on tax planning” (Financial Planning Magazine). This article is excerpted from “Julian Block’s Tax Tips for Marriage and Divorce,” available as a Kindle at Amazon.com and as a print copy at julianblocktaxexpert.com. Law professor James E. Maule, a professor at Villanova University School of Law and Graduate Tax Program, praised the book as “An easy-to-read and well-organized explanation of the tax rules.” The National Association of Personal Financial Advisers says it is “A terrific reference.”

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

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Alimony Recapture Rule

April 16, 2013
Tug o' war

Tug o’ war

“Alimony Recapture” is a tricky and often misunderstood IRS rule (Internal Revenue Code (IRC) §71) that is designed to prevent front loading of alimony payments which, the IRS presumes, are actually a property distribution “disguised” as alimony to save on taxes due. Of course, not everyone who is vulnerable to the recapture rule is trying to disguise a distribution of property as alimony, but the rule is supposed to be applied uniformly, regardless of motivation.

Alimony Recapture applies, in certain cases, where there is an award of alimony[1] from one ex-spouse to the other ex-spouse, that decreases in amount during the first three post separation years[2].  “Recapture” refers to the IRS’s right to force the payer of alimony to pay back, to the IRS, all tax benefits received as a result of alimony payments made to his or her former spouse during those first three years.  (After the third full year, the concept of recapture becomes irrelevant.)

This would be, for many ex-spouses, a tax tragedy.  Recapture aside, alimony is a very generous tax deduction that is almost always of primary importance when negotiating a divorce settlement wherein support of an ex-spouse is appropriate and feasible.  Specifically, 100% of the alimony paid is allowed to be deducted from the payer’s gross income, thereby reducing his adjusted gross (taxable) income, dollar-for-dollar, in the amount of the alimony paid for that year. The ex-spouse who receives alimony, however, must pay taxes (also dollar for dollar) on those alimony payments received.

The rules of recapture are not overly complicated.  They are, however, like so many IRS promulgated dictums, befuddling for most people because they are written in such a convoluted manner and sound, pretty much, like gobbledygook. In a nutshell, the tax benefits of paying alimony will be recaptured by the IRS if, in the 3rd year after your alimony payments commence, you pay greater than $15,000 less in alimony than you paid in the 2nd year. Or, if, during the 2nd and 3rd years, you pay  “significantly less” in alimony than you paid in the 1st year. The term “significantly less” is the IRS’s word, not mine, and it is not defined in the statute.  Luckily, the IRS has provided a recapture worksheet that makes trying to figure out what they mean by “significant” a nullity.  In other words, if you run your numbers through the worksheet and they show that you fall under the recapture rule, you do.  Period.  (“Significant” of not!)

The worksheet and further explanation of the recapture rule can be found in IRS Publication 504 Divorced and Separated Individuals.  That publication forth a nice example that most people find helpful when trying to understand the concept of recapture.  Below is the IRS’s example and their worksheet, straight from Pub 504:

IRS Example: You pay your former spouse $50,000 alimony the first year, $39,000 the second year, and $28,000 the third year. Using these numbers, you report $1,500 as income on your Individual Income Tax Return (Form 1040, line 11). Your former spouse, on the other hand, reports on her Income Tax Return (Form 1040 line 31a), a $1,500 deduction. See worksheet, below:

Worksheet 1. Recapture of Alimony—Illustrated

Note. Do not enter less than -0- on any line.

1.

 Alimony paid in 2nd year

1.

$39,000

2.

 Alimony paid in 3rd year

2.

28,000

3.

 Floor

3.

$15,000

4.

 Add lines 2 and 3

4.

43,000

5.

 Subtract line 4 from line 1

5.

-0-

6.

 Alimony paid in 1st year

6.

50,000

7.

 Adjusted alimony paid in 2nd year
(line 1 minus line 5)

7.

39,000

8.

 Alimony paid in 3rd year

8.

28,000

9.

 Add lines 7 and 8

9.

67,000

10.

 Divide line 9 by 2

10.

33,500

11.

 Floor

11.

$15,000

12.

 Add lines 10 and 11

12.

48,500

13.

 Subtract line 12 from line 6

13.

1,500

14.

 Recaptured alimony. Add lines 5 and 13

*14.

1,500
* If you deducted alimony paid, report this amount as income on Form 1040, line 11.
If you reported alimony received, deduct this amount on Form 1040, line 31a.

So, what facts and circumstances usully exactly triggers the IRS’s Alimony Recapture rule? Typically, it is triggered by a reduction or termination of alimony payments caused by one or more of the following:

  1. a.    A lump sump payment scenario;
  2. b.    A settlement agreement/divorce decree in which alimony payments are decreased over that first three year post separation period;
  3. c.    A settlement agreement/divorce decree that allows for alimony payments to cease prior to the end of the first three years post separation;
  4. d.    A change made to your separation or divorce agreement, by the court or by agreement, due to the recipient’s decreased need, or the payer’s decreased ability to pay, that ignores the recapture rule; or
  5. e.    The payer’s failure to make alimony payments on time, or at all.

You will note that, even if you do everything “right”, for purposes of legal enforceability (i.e., you consult an attorney, who puts the agreed-upon changes in writing, and you execute the document with the same formality as the original agreement, etc.), you still cannot assume that you will be free from the punishing effects of the Alimony Recapture Rule. It’s the old “knew or should have known” scenario.

Are there exceptions?  Yes.  There is no Alimony Recapture if:

  • you made alimony payments over the three year post- separation period that varied because they were a fixed part of your income from a business, property, employment-compensation, or self-employment compensation[3]; or
  • your alimony payments decreased as a result of your ex-spouse’s death; or
  • because the spouse receiving alimony got remarried before the end of the 3rd year post separation period.

 

Caveat: There are rare cases when a party might still be better off working to get his or her alimony payments reduced and taking the lumps from the IRS in terms of recapture.  Such a decision will depend on your individual financial circumstances. Run the numbers, do the worksheet, and talk with you CPA and divorce attorney before making such a decision.

Posted by Robin Graine, JD, Virginia Supreme Court Certified Mediator

This blog and its materials have been prepared by Graine Mediation for informational purposes only and are not intended to be, are not, and should not be regarded as, legal advice.  This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship.  Internet subscribers and online readers should not act upon this information without seeking professional counsel.

[1] The Virginia Divorce Code refers to alimony as “spousal support”.  For this article, however, I will be referring to monetary support payments (that are not child support), from one ex spouse to the other, as “alimony” because that is the term used by the IRS.

[2] The three-year period, in which the payer is vulnerable to the recapture rule, begins the first calendar year during which he or she makes an alimony payment under a divorce decree, order for separate maintenance, or written and signed separation agreement, as long as all the other criteria for alimony are met. The 2nd and 3rd years are the next two calendar years, whether or not any payments are made during those years.  Please know that alimony payments made under a temporary support order do not count as part of the 3 years for purposes of alimony recapture.

[3] Alimony payments are sometimes set to correlate with a party’s business earnings, rents received, etc. such as in a case where the parties agree that the former spouse will receive X% of the payer’s gross or net profits from his or her business/real estate income earned for a set period of time post divorce. 

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