T.C. Sum m ary Opi ni on 20 15 -1 1

UNITED STAT ES TAX COURT

GEORGE A. RESNIK, JR ., Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 30 42 5- 13 S. Fi le d F eb ru ary 23 , 20 15 . Ro na ldJ. J ai co m o, fo r pe ti ti on er. Ang el a J. Ken ne dy, for res po nd en t.

SUMM ARY OPINION MORR ISON, Ju dg e: Thi s ca se was h eardpu rs ua ntto th e p ro vi si on s o f se ct io n 7 46 3 o f th e In te rn al Rev enue Co de ineffe ctwhen th e p et it io n was fil ed . Purs ua ntto sec ti on 74 63 (b ), th e d eci si on to be en te redis no t re vi ewab le by any ot he r co urt, an d thi s o pi ni on sh al l n otbe tre at edas p rece de ntforan y ot he r cas e.-2 -

All subs eque ntsec ti on refe ren ces are t o t he Int ern al Rev enue Co de ineffe ctfor th e y ear i n i ss ue , 20 10 . The res po nd en t In te rn al Rev enue Serv ic e (“ IRS” ) is su eda no ti ce o f de fic ie nc y

to th e p et it io ne r, Geo rg e A. Res ni k, J r., forth e 2 01 0 t ax y ear di sa ll owi ng anali m on y -o r-s ep arat e-m ai nt en an ce d educ ti on inth e am ou ntof $1 4,1 66 , det erm in in g a n i nc om e-t ax de fic ie nc y of $ 3,9 72 , andim

po si ng an accu racy-rela te d p en al ty und er s ect io n 6 66 2( a) o f $7 94 .40 . This cas e ari se s fr om Res ni k’s t im el y

pe ti ti on . W e h av e juri sd ic ti on pu rs ua ntto sec ti on 62 14 (a). The so le is su e to be res ol ve d i s wh ethe r Res ni k i s en ti tl edto anali m on y -o rse pa rat e-m ai nt en an ce d educ ti on for20 10 . W e h ol d t ha t h e is no t. 1 Bac kg ro un d The pa rti es ha ve subm itte d t hi s ca se ful ly sti pu la te d fo r de ci si on un de r Tax Co urt Ru le of P ract ic e & Pro cedur e 1 22 (a). We ado ptth ei r am en de d s ti pu la ti on of fact s. Res ni k re si de d i n In di an a atth e ti m e h e fi le d t he pe ti ti on .

Res ni k c on ced es th athe is li ab le for th e p en al ty und er s ec. 6 66 2( a) i f we 1 ho ldth athe is no t en ti tl edto anali m on y -o r-s ep arat e-m ai nt en an ce d educ ti on for 20 10 .-3 -

Res ni k a ndDian e Res ni k m arri edineit he r 19 83 or 1 98 8. They hadth ree 2 ch il dr endu rin g the ir m arri ag e. The R es ni ks ’ ol de stch il d, Lu ke , was b orn o n Sep te m be r 26 , 19 90 . Luk e su ffer s fr om a li fel on g n eu ro lo gi cal di so rd er tha t in hi bi ts hi s s pe ech an d h is lan gu ag e co m pr eh en si on . On M arch 6, 2 00 7, Re sn ikan d h is wife di vo rced . A “ Rep ort o f Mag is tra te an d J ud gm en t” (“ di vo rce i ns tru m en t” ) di ss ol vi ng th e m arri ag e was ap pr ov edan d or de redby the St. J os ep h C irc ui t Co urt o f St . Jo se ph Co un ty, In di an a. Thi s di vo rce i ns tru m en t g av e p rimary ph y si cal cu st od y

of t he co up le ’s chi ldrenan d own ers hi p o f th e m ari ta l re si de nc e to Res ni k’s ex -wif e. W el ls Farg o h el d a m ortg ag e o n the Res ni ks ’ m ari ta l re si de nc e. The d iv or ce i ns tru m en t re qu ire d Res ni k t o m ak e, “ [a]s a fo rm of m ai nt en an ce”, 7 5% o f th e m on th ly paym en ts for th e m ortg ag e o n the m ari ta l re si de nc e, le ss esc ro w paym en ts forreal est at e ta xe s, as se ss m en ts an d h om eo wne rs ’ in su ran ce, u nt il eit he r th e m ortg ag e was pa idinful l orth e Res ni ks ’ ol de stch il d, Lu ke , no lo ng er l iv edwith R es ni k’s ex -wif e o n t he m ortg ag edpre m is es “ on a pe rm an en t b as is .” The d iv or ce i ns tru m en t re ad s i n pe rti ne ntpa rt tha t: Res ni k andth e IRS ag reedinst ip ul at io ns th atRes ni k a ndhi s ex -wif e, 2 Dian e Res ni k, m arri edin19 88 , bu t the Res ni ks ’ di vo rce i ns tru m en t re ad s: “ The pa rti es [i.e ., Res ni k a ndhi s ex -wif e, Dian e Res ni k] were m arri edonOcto be r 1, 19 83 .” Thi s i nc on si st en cy ha s n o e ffec t o n t he co nc lu si on s re ach edinth is op in io n.-4 -

11 . As a fo rm

of m ai nt en an ce u nd er [In d. Co de Ann . Sec.] 31 -1 5- 7- 2 [“ Fi nd in gs co nc ern in g m ai nt en an ce”] Hus ba ndsh al l p ay th e su m equa l t o s ev en ty-fiv e p erce nt(75 %) of th e ex is ti ng real est at e m ortg ag e [o n the m ari ta l re si de nc e] les s es cro w paym en ts forreal es ta te tax es , ass es sm en ts an d h om eo wne rs ’ in su ran ce (wh ic h s ha ll be th e res po ns ib il ity

of Wife) fir stpa ym en t due with t he m ortg ag e pa ym en t due retro act iv el y forth e m on th of J anua ry , 20 07 an d fo r each m on th ly paym en t due th erea fte r un ti l p ai d i n fu ll or u nt il Luk e is no lo ng er l iv in g wi th W ife on th e m ortg ag edpre m is es on a pe rm an en t ba si s. [Em

ph as is ad de d.] The m ortg ag e o n the m ari ta l re si de nc e was no t yet fu ll y pa iddu rin g 2 01 0. Luk e li ve d wi thRes ni k’s ex -wif e o n t he m ortg ag edpre m is es ona pe rm an en t b as is in 20 10 . Thu s, Re sn ik ’s ob li ga ti on to m ak e “ m ai nt en an ce” p aym en ts un de r pa rag rap h 1 1 o f th e d iv or ce i ns tru m en t re m ai ne d i n e ffec t fo r th e en ti re y ear o f 20 10 . In ac co rd an ce wi th th e p ro vi si on s i n p arag rap h 1 1 o f th e d iv or ce in st ru m en t, Re sn ikpa id$1 4,1 66 to W el ls Farg o dur in g 2 01 0. Th e p art ie s h av e st ip ul at edth atW el ls Farg o re cei ve d t he se pa ym en ts on be ha lf o f Res ni k’s ex -wif e. The di vo rce i ns tru m en t d oe s n otde si gn at e th e “ m ai nt en an ce” p aym en ts th at Res ni k p ai d t o Well s Fa rg o a s ei th er n otin cl ud ib le inhi s ex -wif e’s gr os s i nc om e un de r se ct io n 7 1 o r no t d educ ti bl e b y Res ni k u nd er s ect io n 2 15 . Res ni k a ndhi s ex -wif e were n otm em

be rs of t he same ho us eh ol d a t an y ti m e dur in g 2 01 0. Re sn ik wou ldno t b e li ab le forth es e “ m ai nt en an ce” p aym en ts (oran y subs ti tu te ) aft er the de ath o f hi s ex -wif

e.-5 -

On Ap ril 15 , 20 11 , Res ni k e le ctro ni cal ly file d aFo rm 10 40 , “ U.S. In di vi du al Inc om e Tax Return” , forth e 2 01 0 t ax y ear. Onth atreturn R es ni k de du ct ed$1 4,1 66 forali m on y or s ep arat e m ai nt en an ce. On Oct ob er 1 6, 2 01 2, Re sn ikfil eda Fo rm 10 40 X, “ Am en de d U.S. In di vi du al Inc om e Tax Return” , forth e 2 01 0 t ax y ear. As on hi s o rig in al return Res ni k d educ te d $ 14 ,16 6 fo r al im on y or s ep arat e m ai nt en an ce. On Se pt em

be r 25 , 20 13 , th e IRS is su edth e n ot ic e o f de fic ie nc y to Res ni k fo r th e 2 01 0 t ax y ear. Dis cu ss io n Gen eral ly, th e ta xp ay er b ears th e b ur de n o f pr ov in g, b y a pr ep on de ran ce o f th e ev id en ce, tha t the de te rm in at io ns inth e n ot ic e o f de fic ie nc y are erro ne ou s. Tax Ct. R. Pr ac. & Pr oc . 14 2( a)(1 ); Welc h v . Helv eri ng , 29 0 U.S. 1 11 , 11 5 (1 93 3) . Inso m e cas es th e b ur de n o f pr oo f with re sp ectto rel ev an t fa ctua l i ss ue s m ay sh ift to th e IRS un de r se ct io n 7 49 1( a). W e n eedno t d eci de whet he r th e b ur de n o f pr oo f sh ift s t o the IRS b ecau se th e rel ev an t fa ct s ar e st ip ul at edan d o nl y a le ga l i ss ue rem ai ns . See Est at e o f Mo rg en s v . Comm is si on er, 1 33 T.C. 40 2, 4 09 (20 09 ), aff’d, 6 78 F.3d76 9 (9 th Cir . 20 12 ). Sect io n 2 15 (a) p ro vi de s tha t an in di vi du al m ay ge ne ral ly deduc t “ al im on y orsep arat e m ai nt en an ce p aym en ts ” m ad e dur in g t he tax ab le y ear. Se ct io n 2 15 (b )-6 -

pr ov id es th at“ al im on y

or s ep arat e m ai nt en an ce p aym en ts ” m ean s an y “ al im on y or se pa rat e m ai nt en an ce p aym en t” as d efi ne d i n s ect io n 7 1( b) if the pay m en t i s

“ in cl ud ib le inth e g ro ss in co m e o f th e rec ip ie ntun de r se ct io n 7 1.” Sect io n 7 1( a) p ro vi de s tha t g ro ss in co m e in cl ud es “ am ou nt s re cei ve d a s al im on y or s ep arat e m ai nt en an ce p aym en ts .” Sect io n 7 1( b) (1 ) de fin es an

“ al im on y or s ep arat e m ai nt en an ce p aym en t” as a ny paym en t i n c as h i f: (1 ) th e pa ym en t i s re cei ve d b y , or o n b eh al f of , a sp ou se un de r a d iv or ce o r se parat io n

3 in st ru m en t, (2 ) th e d iv or ce o r se pa rat io n i ns tru m en t d oe s n otde si gn at e th e pa ym en t as no t i nc lu di bl e in gro ss in co m e (o f th e p ay ee s po us e) u nd er s ect io n 7 1 an d n otall owabl e as a de du ct io n (t o t he pa y or sp ou se ) un de r se ct io n 2 15 , (3) th e pa y ee s po us e an d the pa y orsp ou se are n otm em be rs of t he same ho us eh ol d a t the ti m e th e p aym en t i s m ad e, an d (4 ) th e p ay orsp ou se is no t l iabl e fo r an y pay m en ts fo r an y pe rio d a fte r th e d eath o f th e p ay ee s po us e. Howev er, ev enif apa ym en t m eet s the cri te riafor

an“ al im on y

or s ep arat e m ai nt en an ce p aym en t” setou t i n se ct io n 7 1( b) (1 ), th atpart o f any pa ym en t tha t the di vo rce i ns tru m en t fi xe s as a su m pa y ab le forth e supp ort o f ch il dr enof t he pa y orsp ou se is no t s ub ject t o se ct io n 7 1( a) an d i s the refo re n otin cl ud edinth e g ro ss in co m e o f th e p ay ee Fo r pu rp os es of s ec. 7 1, the term “ sp ou se ” in cl ud es a fo rm er s po us e. Sec. 3 71 (d ).-7 -

sp ou se . Sec. 7 1( a), (c) (1 ). Co ns eque nt ly, th atpa rt o f an y pa y m en t tha t the di vo rce i ns tru m en t fi xe s as pay ab le forth e supp ort o f ch il dr enof t he pa y orsp ou se is no t d educ ti bl e as ali m on y or s ep arat e m ai nt en an ce. See sec s. 7 1( a), (c) (1 ) an d (2 ), 21 5( a) an d (b ). Und er s ect io n 7 1( c)(2 ), if a ny am ountsp eci fie d i n the di vo rce i ns tru m en t

“ wil l b e reduc ed ” o n the happ en in g o f a co nt in ge nc y sp eci fie d i n t he in st ru m en t th atrel at es to a ch il d o f th e p ay orsp ou se , th enanam ou ntequa l t o t he am ou ntth at

“ wil l b e reduc ed ” is tre at edas f ix edas asu m

pa y ab le for

th e supp ort o f th e ch il dr enof t he pa y orsp ou se . A con ti ng en cy rel at es to a ch il d o f th e p ay or sp ou se if t he co nt in ge nc y

de pe nd s o n any even t re la ti ng to th atch il d, re ga rd le ss of whe th er the ev en t i s ce rta in or l ik el y to oc cu r. Sec. 1 .71 -1 T(c), Q&A-1 7, Tem po rary Inco m e Tax Reg s., 4 9 F ed . Reg . 34 45 6 (Au g. 3 1, 1 98 4) . Even ts th at rel at e to a ch il d o f th e p ay orsp ou se in cl ud e: th e ch il d’s at ta in in g asp eci fie d a ge orin co m e le ve l, dy in g, m arrying , lea vi ng sch oo l, l eav in g the pa y ee s po us e’s ho us eh ol d, o r ga in in g e m pl oym en t. Sec . 71 (c)( 2) ; s ec. 1 .71 -1 T(c), Q&A-1 7, Tem po rary Inco m e Tax Reg s., s up ra. The pa rti es ag ree t ha t Re sn ik ’s “ m ai nt en an ce” p aym en ts du rin g 2 01 0 m eet th e cri te riaforali m on y

or s ep arat e m ai nt en an ce s etou t i n s ect io n 7 1( b) (1 ). Bu t acco rd in g t o the term s o f th e Res ni ks ’ di vo rce i ns tru m en t, Re sn ikwas re qu ire d t o-8 -

m ak e “ m ai nt en an ce” p aym en ts on ly unt il eit he r: (1 ) th e m ortg ag e was pa idinful l or(2) th e Res ni ks ’ ol de stch il d, Lu ke , no lo ng er l iv edwith R es ni k’s ex -wif e o n th e m ortg ag edpre m is es ona pe rm an en t b as is . Con se qu en tl y , th e am ou ntof Res ni k’s “ m ai nt en an ce” p aym en ts “ wil l b e reduc ed ” to zero inth e ev en t h is ol de st so n, Lu ke , no lo ng er l iv es with R es ni k’s ex -wif e o n ape rm an en t b as is . This ev en t is a co nt in ge nc y

rel at in g t o ach il d o f th e p ay or sp ou se . See s ec. 1 .71 -1 T(c), Q&A-1 7, Tem

po rary Inco m e Tax Reg s., s up ra. By reas onof s ect io n 7 1( c)(2 ), th e am ountof “ m ai nt en an ce” p aym en ts m ad e b y Res ni k dur in g 2 01 0 m

us t b e tr eat ed as fix edby the di vo rce i ns tru m en t as pa y ab le forLuk e’s supp ort. Acco rd in gl y , Res ni k i s n oten ti tl edto anali m on y -o r-s ep arat e-m ai nt en an ce d educ ti on for20 10 . Res ni k a rg ue s tha t s ect io n 7 1( c)(2 ) do es no t re ch arac te riz e an y am ou ntas

“pa y ab le for

th e supp ort o f ch il dr enof t he pa y orsp ou se ” unt il th e rel ev an t

“ co nt in ge nc y ” h as actua ll y oc curred . As of

20 10 , th e “ co nt in ge nc y ” o f Luk e’s m ov in g o utof t he m ortg ag edpre m is es ha d n otoc cu rred , andno reduc ti oninth e am ountof “ m ai nt en an ce” p aym en ts requi redof R es ni k u nd er the di vo rce in st ru m en t h adoc cu rred . Res ni k’s ar gu m en t co nt rad ic ts th e p la in lan gu ag e o f se ct io n 7 1( c)(2 ). Sect io n 7 1( c)(2 ) works a rech arac te riz at io n “ if a ny am ou ntsp eci fie d i n t he in st ru m en t wi ll be reduc ed ” upo n t he “ co nt in ge nc y ”. (Em ph as is ad de d.) If

su cha-9 -

hypo th et ic al reduc ti on oc cu rred , th e effe ctof s ect io n 7 1( c)(2 ) is th at“ anam ou nt equa l t o the am ou ntof s uc h re du ct io n wi ll be tre at edas a n a m ountfix edas pa y ab le forth e supp ort o f ch il dr enof t he pay orsp ou se .” So , forex am pl e, in Fo sb erg v. Co m

mis si on er, T.C. Mem o. 1 99 2- 71 3, 6 4 T.C.M . (CCH) 1 52 7, 1 52 8 (1 99 2) , a 19 85 di vo rce ju dg m en t re qu ire d the tax pa y er t o p ay hi s ex -wif

e th e su m of $1 50 pe r weekun ti l s he di edor r em arri edor unt il th ei r y ou ng es t ch il d re ach ed th e ag e o f 18 , whi ch ev er o ccu rredfir st . Duri ng 19 87 , bef or e th ei r y ou ng es t ch il d ha d re ach edth e ag e o f 18 , th e ta xp ay er p ai d h is ex -wif e $ 7,8 00 (or$1 50 pe r week fo r 52 week s) . Id. Sec ti on 71 (c)( 2) (A) was ap pl ic ab le to th es e $ 15 0- pe r-wee k pa ym en ts be cau se th e p aym en ts “ wil l b e reduc edto zero when pe ti ti on er’s y ou ng es t ch il d re ach es th e ag e o f 18 y ears ”. Id ., 64 T.C.M. (CCH) a t 1 52 9 (em ph as is ad de d) . 4

Fo r ot he r ex am

pl es , see Ham

m on d v . Comm is si on er, T.C. Mem o. 1 99 8- 53 , 4 75 T.C.M. (CCH) 1 74 5, 1 74 6- 17 47 (19 98 ) (p aym en ts of $ 2,0 00 pe r m on th to ex wife th atwou lden d o n 1 8t h b irt hd ay of c hi ld ) an d an i ll us tra ti on gi ve n i n C in dy Ly nn W of fo rd , Div or ce an d S ep arat io n, 5 15 -2 d Tax Mg m t. (B NA), at A-1 8 (Oc t. 24 , 20 11 ) (“ Und er the ir s ep arat io n a gr eem en t, H is to pa y W $3 ,00 0 am on th un ti l W di es . The p aym en ts are t o d ecre as e b y $1 ,00 0 am on th whenth ei r on ly chi ld , who is li vi ng with W, reach es 21 or g radua te s fr om co ll eg e, whi ch ev er i s l at er. Thi s $ 1,0 00 reduc ti on is a reduc ti on on th e h ap pe ni ng of aco nt in ge nc y rel at in g t o a ch il d. Th eref

or e, on ly $2,0 00 of e ach$3 ,00 0 m on th ly paym en t i s treat edas al im on y ; $ 1,0 00 is ch il d s up po rt. Aft er the m on th ly paym en ts are re du cedto $2 ,00 0, the en ti re $ 2,0 00 pa ym en t i s treat edas a li m on y .”).-1 0-

Res ni k c on ced es th athe is li ab le forth e acc ur acy-rela te d p en al ty und er se ct io n 6 66 2( a) i f he is no t en ti tl edto anali m on y -o r-s ep arat e-m ai nt en an ce de du ct io n fo r 20 10 . In ac co rd an ce wi th th is op in io n, Re sn ikis li ab le foran accu racy-rela te d p en al ty und er s ect io n 6 66 2( a) o f $7 94 .40 . Inreac hi ng ou r ho ld in gs , we hav e co ns id eredall arg um en ts m ad e, an d, t o th e ex te ntno t m en ti on ed , we con cl ud e th atth ey are m oo t, i rrel ev an t, o r witho ut m eri t. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te redfor res po nd en t.