Is a “Contract for Deed” deductible when used to satisfy alimony obligations? The Tax Court today said no.
Contract for Deed’s are financing arrangements that allow buyers to purchase property from sellers by borrowing the money from the sellers. The Tax Code only allows deductions for alimony for cash or cash equivalents (e.g. checks). The court ruled that a Contract for Deed is a debt instrument and cannot be deducted as alimony.
In the same case, the petitioner also lost his arguments for deducting Bed & Breakfast expenses and writing expenses because of lack of books and documentation. We cannot emphasize enough that you need to keep your backup paperwork. Have good books (or hire a good bookkeeper).