Ask a tax advisor on the topic of Income tax return

Extraordinary burden

November 28, 2011 | 30,00 EUR | answered by Oliver Burchardt

Dear Sir or Madam,

During my research on my issue, I came across your offer and hope that you can help me.

I am divorced and pay child support for a minor child. The mother has sued me for higher child support as well as payment of allegedly overdue child support since 2005. The family court ruled that there is no arrears and that I have actually paid too much child support over the years. Additionally, a payment amount was set that was lower than what I was already paying at that time. As is often the case in family law, however, the court and attorney fees were divided independently of the specific fault.

I claimed the court and attorney fees incurred by me as an extraordinary burden in my 2010 tax return. The costs for the legal dispute regarding child support were not recognized in the tax assessment. The following was communicated to me in response to my objection:

"Only the direct and unavoidable costs of the divorce process can be considered as extraordinary burdens (§ 33 EStG). This includes, due to the mandatory connection, the costs for the regulation of pension equalization (§ 137 para. 1 and 2 no. 1 FamG), as far as the spouses have not effectively excluded this. Divorce follow-up costs are also not considered inevitable, even if one spouse cannot prevent the inclusion of divorce follow-up matters in the divorce procedure because the other spouse has requested it. Because under the current family law, divorce follow-up matters (other than pension equalization) such as spousal and child support, visitation and custody rights (§137 para. 2 FamG) can also be regulated without the involvement of the family court. Therefore, the costs of the legal dispute regarding child support are not deductible as an extraordinary burden."

That's the quote. I do not agree with this information, especially since similar expenses (child support, visitation and custody rights - my ex is very litigious) have been recognized in the past.

I have until December 9, 2011 to inform the tax office whether I maintain my objection. Please let me know if I have a chance of success.

Sincerely,

Oliver Burchardt

Dear inquirer,

Thank you for your inquiry, which I am happy to answer as part of an initial consultation.

Please note that the tax assessment is based on the information provided. Changing, adding or omitting information can significantly affect the tax result.

The reasoning of the tax office was in line with the consistent case law of the Federal Fiscal Court (BFH) until recently. However, in the recent past, a jurisprudential change that is favorable to you has occurred. With a judgment dated May 12, 2011, case no. VI R 41/10, the BFH decided that the costs of legal action in the form of a civil lawsuit are to be recognized as extraordinary expenses, as you can only enforce your rights through a civil lawsuit after exhausting all out-of-court options. The same applies in your case: Even though it is true that such disputes can be settled without involving the family court, there comes a point where legal action must be taken.

However, despite this jurisprudence, I can give you little hope that your objection will bring the desired success. Although this may sound paradoxical: in the past, the tax authorities have issued a so-called non-application decree for taxpayer-friendly judgments. In practice, this means that the favorable judgment for you will not be applied. You will then have to resort to litigation to assert your rights. Although you will likely win before the Fiscal Court, the tax authorities will appeal the decision, and you may end up before the BFH again. In the end, you will likely be vindicated, but you will have to fight for it.

Nevertheless, I advise you not to withdraw your objection, but to cite the above-mentioned judgment. If the tax office rejects the objection, you can then decide calmly whether to pursue legal action. Once the objection is withdrawn, this option is closed off.

In the event of a rejection of the objection, I am available for further consultation. You can find my contact details in my profile.

Kind regards,

Oliver Burchardt
Certified Public Accountant
Tax Consultant