This case tests the nature and character of "reimbursement alimony." Is it alimony or a marital asset that was equitably distributed or, perhaps, neither? The resolution has significant implications.
If it is alimony, payments are deductible for federal income tax purposes by the payer, 26 U.S.C.A. § 215, and includible in the gross income of the recipient, 26 U.S.C.A. § 71; but if it is a marital asset, it is neither deductible by the payer nor includible in the gross income of the recipient. If it is alimony, it will cease upon the death or remarriage of the recipient. N.J.S.A. 2A: 34-25; Schaeffer v. Schaeffer, 184 N.J. Super. 423, 428 (App.Div.1982); Davis v. Davis, 184 N.J. Super. 430, 436 (App.Div.1982). But if it is a marital asset, it will not. If it is alimony, it is not dischargeable in bankruptcy; but if a marital asset, it is. 11 U.S.C.A. § 523(a)(5).
A judgment of divorce entered January 26, 1984 granted the wife reimbursement alimony of $46,706.50 for financial contributions made by her, during the marriage, to her husband's professional education and training. See Reiss v. Reiss, 195 N.J. Super. 150, 478 A.2d 441 (Ch.Div.1984). However, because there were virtually no marital assets, the husband was not required to pay the full amount at the time of the divorce, but was permitted to make monthly payments of $1,500, without
interest. Interest was disallowed because the award was based upon a gross income analysis (her net earnings were not available) and the court concluded that the equities balanced out by using her gross income figures, and foregoing interest.
This issue arose because the wife remarried less than two months after the divorce and has received only two monthly payments totalling $3,000. The husband contends that since the payments are described as "reimbursement alimony" it should be treated as alimony and cease upon her remarriage. She disagrees and argues that the award is not alimony per se, but, in fact, constitutes reimbursement for financial contributions she made for her husband's professional education, which should not cease upon her remarriage.
It is not clear how the phrase "reimbursement alimony" arose, but some believe it is a contradiction of terms and, indeed, a misnomer. Alimony is future "sustenance or support" for a divorced person payable by a former spouse, Black's Law Dictionary (5 ed. 1979) 67, and its award generally involves a determination of the future needs of the recipient and the future ability of the former spouse to pay. The past is relevant only to determine the standard of living to which the recipient became accustomed during coverture. On the other hand, "reimbursement" involves a determination of what was paid in the past. It has nothing to do with the future needs of the recipient or the future income of the payer. It is remarkably similar to the return of a financial advance or investment. Thus, the determination of alimony essentially looks to the future, while reimbursement looks to the past.
[t]he concept properly accords with the court's belief that regardless of the appropriateness of permanent alimony or the presence or absence of marital property to be equitably distributed, there will be circumstances where a supporting spouse should be reimbursed for the financial contributions he or she made to the spouse's successful professional training. [at 501]
This would suggest that it is neither alimony, nor a marital asset. However, Mahoney did recognize that its character and
nature was important but left its resolution to "future cases," id. at 503, n. 5 as did Reiss, ...