ok thank you this case presents the question of whether to apply a new section seventy one of the tax code which includes the changes made to that code by the one thousand nine hundred four deficit reduction act or old section seventy one to determine whether and to what extent appellant stanley johnson can deduct the four hundred thousand dollars alimony payment he made to his ex wife in one thousand nine hundred seven the outcome of this case hinges on the proper interpretation and application of the effective date provision of the deficit reduction act which is section four twenty two of that act section four twenty two one contains a general rule which applies new seventy one to divorce or separation instruments executed after one nine hundred eighty four first the parties nine hundred ninety seven settlement agreement which provided for the alimony payment in question is a written instrument incident to divorce executed after one thousand nine hundred four such that pursuant to four twenty two one new seventy one applies to this case and permits mr johnson full deductibility of that four hundred thousand dollars payment we believe that the court need look no further than this subsection in order to reach a decision in this case now even if the government's contention is correct that four twenty two need to limits rather than expand that location of the general rule in this case neither the settlement agreement nor the family courts dismissal order is a modification under that subsection four twenty two e two simply does not apply to this case thus even under the government's interpretation of the effective date provisions we would argue that new seventy one applies and finally in the alternative of the court nevertheless determines that old seventy one applies to this case mr johnson is still entitle to a partial diversion of his four hundred thousand dollars payments so as to our first argument we believe that a plain language reading of four twenty two e one requires application of new seventy one for twenty two year one states specifically that new seventy one shall apply to divorce or separation instruments executed after december thirty first one thousand nine hundred four the term divorce or separation instruments is specifically defined in tax code seventy one b two and when we look at the definition contained therein it states that such an instrument includes a written instrument incident to a decree of divorce the fact that the one thousand nine hundred seven agreement was a written instrument appears to be undisputed in this case in determining whether that instrument was incident to divorce we can look for guidance to some pretty nine hundred eighty four cases which we've cited in our brief a general rule for example is contained in the second circuit's decision in newton where a legal obligation to support survives the dissolution of a marriage and subsequent adjustment of this obligation is incident to the divorce within the purview of the statute and i'd like to point out that hollander which is the case from this court also reached that same conclusion there doesn't seem to be any real debate but the one thousand nine hundred seven agreement between the parties here was a written instrument incident to divorce and we would argue that the plain language of the statute does not require this court to go beyond that analysis if the instrument in question is a written instrument incident to divorce executed after one thousand nine hundred four new seventy one applies to this case now even assuming that one at the language of four twenty two each two which provides for the new law to then apply to modifications of a previous divorce decree we argue that new seventy one still applies the government argues that for twenty two  limits the afflict ability of the general rule in cases where the instrument in question qualifies as a modification of a divorce instrument executed prior to nine hundred eighty five because in this case there is a divorce instrument executed before  government argues that this becomes the relevant question in order to resolve that question i think it's important to look closely at what a modification is and what it is not and to compare these findings to the agreement we have in this case if we look at the cases that the government has decided both in its brief and below we can see that a modification in those types of cases bears little resemblance to the one thousand nine hundred seventy three between the parties here first of all i'd like to point out the three cases the government has cited martin marchand's lippman and stroud do not directly address the issue we have here so none of them provide any sort of direct guidance to the sport none of them relationship between the two parts of section four twenty two of the cases cited by the government two of those cases both martin and lippman dealt with later court decrees or orders they did not deal with independent agreements entered into by the parties so arguably there wasn't even an issue there of an written instrument incident to divorce because arguably a court order would not meet that criteria at all now stroud did deal with a later agreement however in stroud that agreement only addressed payments of arrearages which under my understanding are did would be deductible under both the new and the old code so the application of old seventy one in that case apparently would not have changed the result at all now the important thing about these three cases is that each of them dealt with only slight changes to a previous alimony what does the settlement agreement do doesn't it in effect wipe out the decree with respect to this issue now let's let's look at the settlement agreement yet record twenty eight and twenty nine because i would like to point you to some language there i think the answer to your first answer the illegals if they're divided we can look at the ok i think that an agreement between the parties could have various legal effects in this case the answer to your question would be yes it completely replaces the divorce decree now that i don't think that needs to be the case every single time i think an agreement could just modify it the parties could agree for example to pay more or less alimony based on what the complication is but why is because of these precise meaning of the term modification i don't think that a modification means a wholesale change or a placement of a decree and that's borne out in the case law but it's also resteal stance in other words in the end  the judge gave you to create the dissolution so they are divorced so obviously their agreement doesn't change that in this case the parties actually specifically stated in the agreement that the court would no longer have jurisdiction over any issue not that relates to the case though if the parties were children or something like that they might not be able to over you know replace i guess the korean that way however in this case i think the parties did have that ability groom or comply with what were the mechanism for enforcing i would not go back down family court it would have to go to a court of general jurisdiction where it would be enforced as a contract that's according to the language that the parties agreed to within the agreement and i wanted to point out that the understanding of what a modification is as as in the case law is also in accord with a commonsense understanding of what a modification is as defined in black's law dictionary for example modify is defined as quote to change in incidental or subordinate features and black's gives a specific example of a modification as to increase or decrease i think that that shows that if you have a good career court order or agreement where the parties agree to pay more or less alimony and that agreement looks and stroud to the prior court to create that would be a modification in this case however the settlement in a if they did order exactly now i would say if the question of i don't believe so it would be if the court had said for the next thirty years they your wife this much money  per month and then at some point in the middle of that time or towards the end of that time the parties had agreed hey i'm just going to pay you the rest of this let's look back to what the court ordered i'm just going to why with it and then i won't have any more obligations to do it in  sum that might be a modification in this case the parties took this out of the court system and i think if we look to procedurally what happened in family court that becomes even more clear because in this case there was a family court order that had increased mr johnson's alimony payments had looked back to the previous to korea and said you're going to have to pay your ex wife more and then the reason the parties got into the settlement situation is because he had appealed that order now if we were looking at that order right now that the district where the family court has issued that would be a modification but the parties decide to completely end any obligation that existed previously under under the it did make a lump sum but i still think there's a distinction here between looking back to and satisfying what the just what the family court had previously ordered and saying ok even though the decree orders me to pay alimony to you indefinitely we're going to agree to have a contract between ourselves to pay a lump sum now that one some may or may not equal well probably there's no way of determining whether that lump sum equaled what would be zero but i think that that is the fundamentally different situation than what than what you're talking about  either party had gone back into the family court and said we want to modify or i want to modify the other party does not oppose the duty to pay alimony monthly and instead we have agreed upon a with that be a modification instrument incident a divorce so you wouldn't have the same question of here which is distinguishing when you do have a written instrument incident to divorce when is that instrument also a modification  think maybe it's useful to look at an analogy well not exactly an analogy but a comparison with contract law in this case which is a modification is really more like an amendment and contract law whereas what we really have here i think i ovation we have an agreement that completely takes on new obligations it looks only forward not back it purports to be now the only agreement between the parties and i think  be so i don't understand why that would be the case and you know as you said if it decreased the amount it would be a modification and that would decrease it from something to zero so i'm trying to understand the legal threat of your argument and i think the distinction is that in one case i wasn't assuming that all of the language doing away with the court prior orders was in the agreement that's that's one reason i think you could have an agreement that didn't say any of that and that just said i'm going to pay you more alimony i think that would be a modification if the parties i think it would be pretty rare for the parties to agree to something where they they would agree to pay  indefinitely more alimony and to then include all the language divesting the family court of justice but if that did happen i would say that it's not a modification that would be a standalone agreement if it did include that type of language but if they cre following the language of this agreement there's no way the parties can go back and try and enforce the decree or any modifications made there to by the family court and i think you can see that further when you look at the actual family court order that was issued in this case and that's the excerpts of record thirty four that suggest that stipulation an order doesn't purport to look back to the divorce decree either or to affect in any way any modifications made prior to to this order by the court based that to create all it does is the typically if you have a settlement agreement in a divorce even in a county that has a family court and the divorce is final so that there's no question that you've been divorced and there's no kids  whether it's incident to a divorce and whether it's a modification of that to create are two separate issues so certainly it could be incident two but not necessarily a modification of force i think that maybe that goes back to my my attempt at a contract law analogy which is if you if you amend something that's that's what it means to modify to change in incidental terms is to modify and the case law backs that up all of those cases dealt with changing things an incidental terms increasing or decreasing the support obligations dealing with the ridges which had already been ordered if you have a case where the where it's purport to do away with something that existed previous to that i believe it's inserting a new obligation in place of the old and i was forced to three paragraph that has alimony  it's by rip wasting it by replacing it with a new one by entering into a new contract now it's the it doesn't quite work because the divorce decree was ordered by the court and now we have an agreement by the parties but yes you can imagine if they're well it doesn't quite work as an analogy i'm saying but i think it does work in practice and as a legal matter to say that now we used to have an obligation under the divorce decree now we don't now it's as of the divorce decree no longer  exists we now have an obligation under this agreement which we ourselves entered into i know my time is up but i want to just point out that the approach we're suggesting is not only in accord with the plain language but it's a common sense approach for example if you have a document prior to a new law and a document after a new law and the later document purports to do away with and replace the earlier document then the new law in the sense that the new law should apply to the to the later talk human this is what people would expect to  they were entering into this agreement in one thousand nine hundred seven you know teen years after the old law changed they probably said we're entering into this agreement we're doing away with title divorce again getting rid of this problem in my life they assumed that is going to get that you know i think that there is a certain sense to you i'm not saying that it should never apply and my only contention here as far as commonsense is concerned that if you're a party thirty years down the road years down the road are you commonsensical going to think that this new agreement you've entered into doing away with all that old divorce stuff that you've been dealing with are you really going to think you or your family law attorney that you're going to have to read an old provision of the law that existed prior to one thousand nine hundred four and i just don't think that it's reasonable to expect people to make that as a common sense determination good morning may i please the court john symond representing the commissioner of internal revenue council right there are questions you need to address the first being are whether the old version of section seventy one of the internal revenue code applies in this case or the the new version and then secondly if the if the old version applies how does it apply so i like to address the first question first defra the deficit reduction act of one nine hundred eighty four and section four twenty two he won and he too must be read together those two provisions you wanted me to and they must be harmonized and it's our position the only way to do this is to recognize that in effect there are three categories  the instrument in question is what really controls however under four twenty two each there is a third category created or modified the category of modified decrees now these are decrees that were entered hundred eighty five but they were modified after one nine hundred eighty five and that's the situation we have here now in this instance the parties can choose which laws apply but if they fail to choose the default is that the old law applies here the parties of course did not indicate which law would apply so the default is that the old law doesn't apply now this three parts think sion makes sense as one of the soft phase in of the new tax law critically this is the only way to read section four twenty two so that for twenty two the two still have some meaning now this reading that is creating this third category of modified decrees it's settled law in the tax court in the martin ca recognize this category of modified decrees under four twenty two to now the taxpayers reading of four twenty two each two is so cramped that it renders this section subsection meaningless and superfluous the taxpayer says  is not a limitation or an excess option to that rule instead taxpayer says that this subsection expands the application of the new law however the taxpayer can't give us a single example of agreement without making any changes at all of course that's not the situation here there were significant changes made when it was was modified but under the taxpayer's reading for twenty to one the new law already applies because  the the decree was ultimately adopted after the thank you date of the of the statute so therefore there is no need to expand the application of the new law so for twenty two each he was simply superfluous and has no role and obviously we need to interpret all parts of the statute so they do have meaning and can be harmonized together and in fact in all of the taxpayers examples in their brief the new law already applies in the their theory so there's no need for four twenty two each two to expand applicability  of the law they make much in their brief about congress failure to use a special term of art to create a general rule and then qualify it as it did here and for twenty two but in it for twenty two congress set up the general principle in four twenty two one and then said it would apply in except as otherwise provided in this subsection unquote and then in the very next subsection each to that use the word  also to indicate the congress qualify the general rule and created a third category of modified decrees and also in this instance is used to further refine the distinctions between the types of decrees there is certainly no unfairness in applying the old section seventy one to a modification of a decree that was first in or eight years before the statute was amended in fact it would be unfair to allow the taxpayer here to receive by judicial fiat that which he could not get by negotiation with his former  spouse and the treasury regulation that they cited certainly does not support their position either moving on to the second point in our system under the old section seventy one the tax payers four hundred thousand dollars payment came about as a result of mr johnson's motion to modify the old decree and if there's a question about whether this was a modification or not i think the taxpayers motion in family court certainly resolve that as is stated in the settlement agreement itself on page twenty eight of the excerpts of record  settlement in fact substituted a four hundred thousand dollars lump sum payment for continuing periodic payments and that was not something the taxpayer obviously would have agreed to absent the seventy six cream in fact is along the lines of a complete no vacation as council would would suggest we would have a taxpayer making a four hundred thousand dollars payment without any reason to do so without the underlying divorce decree this payment doesn't make any sense the martin and the others make no distinction between a slight modification and a whole film advocation the statute doesn't make that distinction either it just refers to the concept of modification and that is certainly what what occurred here deduction however section seventy one c doesn't really apply at all this provision only applies where a lump sum payment is used to pay off the principal sung principal some of indebtedness that was specified in the original decree and here is section seventy one c doesn't apply at all because neither the seventy six decree nor that any of the later modifications or even the final modifications set out a principle son this wasn't a payment of the debt this was this was alimony  together all the payments and then making that are a constructive principle amount in fact that's not what happened that was very and certainly seventy section seventy one c just not in sun the tax court correctly construed and applied the just really quickly i think that there is no reason according to the plain language of the statute to think that congress did not intend for it to be as expansive this we are arguing the statute provides for a general rule to let new seventy one apply why not interpret that to let new seventy one apply to as many circumstances as the language would allow an in addition this supports congress's intent in the alimony provisions of the tax code to require the person who benefits from the alimony payment to pay the tax on that alimony now under our interpretation that is exactly what would happen here now the other thing that i wanted to point out is the government continues to say that we would render four twenty two e two  pointed out in my prior argument that's not the case we're just saying look first to see whether it's a written instrument incident to divorce if it's not then you can move on and say is this a modification such as a court order modifying alimony thank you think i'm done thank you