Alimony? Taxpayer and ex-spouse agree to a lump sum settlement

Alimony? Taxpayer and ex-spouse agree to a lump sum settlement and terminate annual alimony payments......
There is a QDRO and a distribution from the payer's 401K. The ex-spouse will be receiving the 1099-R. Does this still get reported as alimony paid since a 1099-R will be issued?

The answer is:  No.

The payer does not get to claim the deduction if he never claimed the income. Since it is a 401K he did not pay tax on it when he earned it and if the 1099-R is going to the ex-spouse then he will not have taxable income on it now either. That is one basic tenant of taxes that holds true --  if it is not included in income, then it is not able to be deducted.  Ipso facto, no alimony deduction.

Generally, when there is a QDRO, the purpose of the getting the court to order this distribution is to equalize the sharing of marital assets. Sharing/splitting marital assets does not give rise to alimony at all.

Typically when the distribution is made pursuant to a QDRO, the distribution goes to the spouse who does not own that account. If the spouse rolls it directly into his/her IRA, the distribution is not taxable to anyone.

If s/he takes the money out, it is taxable to the recipient, not to the original account holder.

Read more about it here: Retirement Topics - QDRO - Qualified Domestic Relations Order  

You may want to read more about what is alimony, here Alimony

What the IRS does not include in their description here, but should, is the timing of alimony payments. They only include that information in the explanation about alimony recapture. Read here: Recapture of Alimony

There is no alimony unless it's cash paid to (or paid on behalf of) the ex-spouse as required by the settlement agreement.