T.C. Mem o. 2 01 4- 22

UNITED STAT ES TAX COURT

BRADLEY W . W IGNALL, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 20 85 -1 2. Fil edJan ua ry 28 , 20 14 . Gary P. Co m paan d Do ug la s C hi ap uz io , forpe ti ti on er. Nhi T. Luu a ndKim

be rly T. Pack er, fo r res po nd en t.

MEMORANDUM OPINION KROUPA, Ju dg e: Res po nd en t d et erm in eda $5 ,88 2 de fic ie nc y in an d a 1 $1 ,17 6 a ccu racy-rela te d p en al ty und er s ect io n 6 66 2( a) with re sp ectto pe ti ti on er’s 2 All m on et ary am ou nt s ar e ro un de d t o t he ne ares t d ol la r. 1 All sec ti on refe ren ces are t o t he Int ern al Rev enue Co de in effe ctfor20 08 , 2 an d a ll Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e, (co nt in ue d...)-2 -

[* 2] Fed eral in co m e ta x fo r 20 08 . W e m us t d eci de two is su es . The fi rs t i ss ue is whe th er p et it io ne r is en ti tl edto de du ctsupp ort p aym en ts he m ad e to hi s fo rm er sp ou se as a li m on y . W e h ol d t ha t h e is . The s eco ndis su e is whet he r pe ti ti on er i s li ab le foranaccu racy-rela te d p en al ty. W e h ol d t ha t h e is no t. Bac kg ro un d The pa rti es subm it te d t hi s ca se ful ly sti pu la te d p ur su an t t o R ul e 1 22 , andth e fact s ar e so fou nd . The s ti pu la ti on of f act s an d i ts acco m

pa nyin g e xh ib it s ar e in co rp or at edby thi s re fere nc e. Pet it io ne r res id edin Oreg on when he fil edth e pe ti ti on . Pet it io ne r m arri edMarc i Lee W ig na ll (Ms . W ig na ll ) in 19 93 , andth e co up le ha d t hr ee ch il dr en . The co up le ’s m arri ag e en de d i n 2 00 6. AnOreg on cir cu itco urt en te reda st ip ul at edge ne ral jud gm en t o f m ari ta l d is so lu ti on(jud gm en t). The jud gm en t re qu ire d p et it io ne r to pa y Ms . W ig na ll sp ou sa l s up po rt o f $1 ,90 0 p er m on th(supp ort p ro vi si on ) fro m Ju ly 200 6 t hr ou gh Decem be r 20 11 (p aym en t t erm). The s up po rt p ro vi si ondi d n otad dr es s wh ethe r pe ti ti on er h adto co nt in ue to m ak e p aym en ts if M s. Wign al l d ie d b efo re the pa ym en t t erm en de d.

(...co nt inue d) 2 un le ss ot he rwis e in di cat ed .-3 -

[* 3] Pet it io ne r pa id$2 1,0 00 insp ou sa l s up po rt ( supp ort p aym en ts ) in 20 08 . Pet it io ne r fi le d a n i nd iv idua l i nc om e ta x re turnfor20 08 an d c la im edanali m on y de du ct io n fo r th e supp ort p aym en ts . Res po nd en t i ss ue d p et it io ne r a d efi ci en cy no ti ce tha t d is al lo wedth e cl ai m edali m on y de du ct io n a ndde te rm in edanaccu racyrel at edpe na lty . Peti ti on er t im el y fil eda pe ti ti onch al le ng in g re sp on de nt ’s de te rm in at io ns . Dis cu ss io n Thi s i s an ot he r in st an ce wh ere we a re re qu ire d t o d et erm in e whe th er the am ou nta sp ou se pa idto th e fo rm er s po us e qua li fie s as ali m on y . W e m us t d eci de whe th er the supp ort p aym en ts m eetth e d efi ni ti on of a li m on y un de r se ct io ns 71 an d 2 15 . 3 W e b eg in with t he ali m on y de du ct io n. A d educ ti on fro m gro ss in co m e is al lo wedfor

ali m on y pa ym en ts to th e ex te ntsu ch pa ym en ts are i nc lu di bl e in th e gr os s i nc om e o f th e rec ip ie ntsp ou se un de r se ct io n 7 1. Se c. 21 5( a) an d (b ). Whe th er a p aym en t co ns ti tu te s al im on y withi n the m ean in g o f se ct io ns 71 (a) a nd The tax pay er g en eral ly bears th e b ur de n o f pr ov in g t he Co m m is si on er’s 3 de te rm in at io ns are erro ne ou s. Ru le 14 2( a). The bu rd enof p ro of m ay sh iftto th e Co m m is si on er i f th e ta xp ay er s at is fie s ce rta inco nd it io ns . Sec. 7 49 1( a). Res ol ut io n o f al l fa ctua l i ss ue s h ere i s b as edon a pr ep on de ran ce o f th e ev id en ce. The refo re, we n eedno t co ns id er wh ic h p arty ha s t he bu rd enof p ro of

. See Est at e of Bo ng ardv. Co m

m is si on er, 1 24 T.C. 95 , 11 1 (2 00 5) .-4 -

[* 4] 21 5( a) i s d et erm in edby referen ce t o s ect io n 7 1( b) (1 ). A paym en t tha t d oe s no t m eetth e d efi ni ti on is de em eda di sg ui se d p ro pe rty div is io n, n ei th er t ax ab le to th e p ay ee n orde du ct ib le by the pa y or . Jo hans on v. Co m m is si on er, 5 41 F.3d97 3, 97 6- 97 7 (9 th Cir . 20 08 ), aff’g T.C. Me m o. 2 00 6- 10 5. Th e p ay or m us t h av e n o li ab il it y to co nt in ue pa ym en ts aft er the pa y ee’s d eat h (t erm in at io n re qu ire m en t) f or a p aym en t t o b e d educ ti bl e as ali m on y . Sec. 7 1( b) (1 )(D). W e th eref or e m us t 4 de ci de whet he r pe ti ti on er wo ul d h av e b een ob li ga te d t o c on ti nu e m ak in g t he supp ort p aym en ts aft er Ms . W ig na ll ’s dea th . W e ap pl y a th ree- st ep ap pr oa ch to de ci de whet he r a p aym en t s at is fie s t he te rm in at io n re qu ire m en t. See J oh an so n v . Comm is si on er, 5 41 F.3dat 9 76 -9 77 . 5 The fir stst ep is to ev al ua te whet he r th e d iv or ce d ecre e p ro vi de s t ha t the paym en ts te rm in at e upo n t he pa y ee’s d eath. Id . at 9 76 . If th ere i s n o s uc h p ro vi si on , th en Sec. 7 1( b) (1 ) ha s t hr ee o th er re qu ire m en ts . Firs t, the pa ym en t m us t b e 4 rece iv edby a spo us e u nd er a d iv or ce o r se pa rat io n i ns tru m en t. Sec . 71 (b )(1 )(A). Seco nd , th e d iv or ce o r se parat io n i ns tru m en t m us t n otde si gn at e th e p aym en t as no t i nc lu di bl e in gro ss in co m e o r no t al lo wab le as ade du ct io n u nd er s ec. 2 15 . Sec. 7 1( b) (1 )(B) . Thir d, t he pa y ee an d t he pa y orm us t n otbe m em

be rs of t he same ho us eh ol d wh enth e p aym en t i s m ad e. Sec. 7 1( b) (1 )(C) . Res po nd en t co nc ed es th atth es e requi rem en ts ha ve be enm et . An ap pe al inth is cas e wou ldli e to th e Co urt o f App eal s fo r th e Nin th 5 Ci rcu itab se ntst ip ul at io n t o t he co nt rary and , acco rd in gl y , we fol lo w th e la w of th atcir cu it . See Go ls env. Co m m is si on er, 5 4 T.C. 7 42 (19 70 ), aff’d, 4 45 F.2d98 5 (1 0t h C ir. 1 97 1) .-5 -

[* 5] th e Co urt l oo ks to whet he r th e p aym en ts wou ldterm in at e atth e p ay ee’s d eat h by op erat io n o f St at e la w. Id. Andif St at e law is am bi gu ou s, the Co urt wi ll lo ok so le ly to the di vo rce d ecre e to de te rm in e whe th er the pa ym en ts wou ldterm in at e at th e p ay ee’s d eat h. Id . Pet it io ne r an d re sp on de ntag ree tha t the jud gm en t d idno t ex pr es sl y te rm in at e p et it io ne r’s ob li ga ti on to co nt in ue pa ym en ts if M s. Wign al l d ie d. Acco rd in gl y , we lo okto Oreg on law. W e n ow co ns id er wh ethe r a s po us al supp ort o bl ig at io n t erm in at es by op erat io n o f Oreg on law. We con si de r bo th rel ev an t s ta tu te s an d c omm on law i n de ci di ng th is qu es ti on . See, e.g ., DeLon g v . Comm is si on er, T.C. Mem o. 2 01 3- 70 . The parti es ag ree t ha t Ore go n s ta tu te s d o n otad dr es s t hi s i ss ue , andwe co nc ur . See, e.g ., Or. Rev. St at . sec . 10 7.1 05 (1 )(d ) (2 01 1) . Thu s, we co ns id er wh ethe r Oreg on co m

m on law es tabl is he s t ha t the ob li ga ti on to pa y sp ou sa l s up po rt te rm in at es up on th e d eat h o f th e p ay ee s po us e. Pet it io ne r arg ue s t ha t thi s p ro po si ti on is un am bi gu ou sl y est ab li sh ed . See Pri m e v . Prim e, 13 9 P .2d55 0 (Or . 19 43 ). The Ore go n S up rem e Co urt, i n P rime, st at edth at“ [t]he rig htto rece iv e al im on y an d t he co rres po nd in g dut y to pa y itare ge ne ral ly con si de redto ha ve term in at edonth e d eat h o f ei th er o f th e two pa rti es , at le as t wh ere n o s ta tu te to th e co nt rary exi st s, an d t he jud gm en t o r de cree is si le nton-6 -

[* 6] th e subjec t.” Id . at 5 57 (ci ti ng 27 C.J.S. Di vo rce p . 99 9 s ec. 2 40 -b ). Pet it io ne r in te rp ret s t hi s as a st at em en t o f Oreg on law. Res po nd en t, o n t he ot he r ha nd , su gg es ts th is is a st at em en t o f m ul ti juri sd ic ti on al law an d m erel y di ct a. Res po nd en t s ug ge st s t he co urt i nc lu de d a st at em en t o f m

ul ti juri sd ic ti on al law b ecau se th e is su e d eci de d i n P rime, acco rd in g t o re sp on de nt , was wh ethe r th e p ay ee’s ri gh t t o re cei ve ali m on y su rv iv es th e p ay or ’s dea th . Res po nd en t fu rth er co nt en ds th atPri m e d idno t d eci de whe th er the ob li ga ti on to pa y supp ort t erm in at edup on th e p ay ee’s d eat h. Th us , res po nd en t co nt en ds th atOreg on co urts ha ve no t d eci de d t hi s i ss ue . W e d is ag ree wit h re sp on de nt . On ap pe al , th e le ga l i ss ue th e Oreg on Supr em e Co urt ad dr es se d i n P rime was whethe r a co urt m ay m od ify the equi tabl e p orti on of adi ss ol ut io n a gr eem en t th atals o i nc or

po rat edco nt ractua l el em en ts . Id. at55 4, 5 57 . Thu s, the is su e 6 InPri m e v . Prim e, 13 9 P .2d55 0, 5 54 (Or. 19 43 ), fo rm er s po us es en te red 6 in to a co urt-app ro ve d d is so lu ti on ag reem en t wi th pro pe rty set tl em en t an d a li m on y pr ov is io ns . The s po us es ha d a gr eed , ho wev er, tha t the pa y ee’s ri gh t t o s up po rt su rv iv edth e p ay or ’s dea th . Id. at55 7. Th erea fte r, th e p ay orhu sb an d p as se d away, an d the pa y ee wi fe s ou gh t a d ecl arat ory jud gm en t ag ai ns t the form er hu sb an d’s es ta te . Id. at55 3. Th e es ta te so ug htto m od ify the pa ym en t o bl ig at io n un de r equi tabl e p rin ci pl es . Id. at55 4. If the supp ort was in th e n atur e o f a p ro pe rty set tl em en t, the n t he ag reem en t co ul d n otbe m od ifi edbe cau se itwou ldbe go ve rn edby con tra ctlaw. Id . The (co nt in ue d...)-7 -

[* 7] res ol ve d i n P rime was no t, as res po nd en t s ug ge st s, wh ethe r th e ri gh t t o al im on y term in at es up onth e p ay or ’s dea th . Thatpri nc ip le was a lre ady est ab li sh ed un de r Oreg on law. Th e co urt u lt im at el y he ldth atth e equi tabl e co m po ne ntof a de cree co ul d b e m od ifi edan d d idterm in at e th e o bl ig at io n u nd er the rel ev an t equi tabl e co ns id erat io ns . Id. at55 9. Th e co urt, i n re ach in g t ha t co nc lu si on , st at ed th e ru le un de r Oreg on law. A co m pl et e rea di ng of P rime reve al s t ha t the co urt co ns id eredth e te rm in at io n i ss ue to be alr eady res ol ve d wi th res pe ctto th e d eat h o f bo th th e p ay oran d t he pa y ee. W e co nc lu de th atth e Oreg on Supr em e Co urt h as st at edOreg on law. Oreg on co urts have als o i nt erp ret edPri m e as a st at em en t o f Oreg on law o n t he is su e. See In re Ma rri ag e o f Que nz er, 5 99 P.2d12 17 , 12 21 (Or. Ct. Ap p. 1 97 9) ; In re Ma rri ag e o f Carrie r, 59 5 P .2d82 7, 8 29 (Or. Ct. Ap p. 1 97 9) ; Kem p v . Dep’t o f Rev enue , 19 98 W L 47 79 58 (Or. T.C. Ju ly 27, 1 99 8) . Andth ere i s n o i nd ic at io n th atan y Oreg on co urt h as ad op te d adi ffer en t ru le . (...co nt inue d) 6 ag reem en t’s s up po rt p ro vi si on , ho wev er, was in th e n atur e o f al im on y . The co urt m od ifi edth e ag reem en t u nd er equi tabl e p rin ci pl es to rel ie ve th e es ta te of t he ob li ga ti on . Id. at55 8. Th e co urt i n re ach in g t ha t co nc lu si on no te d t he ob li ga ti on to pa y wou ldha ve en de d wi th th e h us ba nd ’s pas si ng if t he ag reem en t h adbe en si le nt . This was s ig ni fic an t as th e ag reem en t ca ll edfor ali m on y to surv iv e th e pa y or ’s dea th in co nt ras t t o t he de fau ltrul e. See i d. at55 7. In othe r wor ds , th e ob li ga ti on to pa y

an d t he co rres po nd in g ri gh t t o re cei ve ali m on y term in at edup on th e d eat h o f ei th er s po us e u nd er Oreg on law. Id .-8 -

[* 8] Res po nd en t em

ph as iz es th atth e Co urt o f App eal s fo r th e Nin th Cir cu itha s in di cat edth atOreg onlaw i s ambig uo us on th is po in t. See Fit hi anv. Un it ed St at es , 45 Fed . App x. 7 00 , 70 1 (9 th Cir . 20 02 ). In F it hi an , th e Co urt o f App eal s co nc lu de d t ha t Ore go n c omm on law d idno t d ire ct ly establ is h t he term in at io n requi rem en t. Id . The Co urt o f App eal s, h owe ve r, di d n otsel ectFithi anfor publ ic at io n. Th us itis anunpubl is he d d is po si ti on pre da ti ng Jan ua ry 1, 2 00 7 a nd no t t o b e ci te d a s p rece de nt . See 9 th Cir . R. 36 -3 (a), (c ). Thu s, we co nc lu de th at Fi th ia n i s n otco nt ro ll in g, an d t he is su e rem ai ns un res ol ve d i n the Nin th Cir cu it . W e th eref

or e h ol d t ha t the ob li ga ti on to pa y supp ort t erm in at es up onth e pa y ee’s d eat h u nd er Oreg on co m m on law. Thu s, p et it io ne r m etth e te rm in at io n

7 requi rem en t u nd er s ect io n 7 1( b) (1 )(D). Pet it io ne r is en ti tl edto de du ctth e supp ort pa ym en ts for20 08 as a li m on y an d d idno t und ers ta te hi s t ax .

W e n ot e th atth e Oreg on tax co urt n ot edth e te ns io n re ga rd in g t he 7 te rm in at io n re qu ire m en t b etweende ci si on s b y Oreg on co urts an d ade ci si on by the Co urt o f App eal s fo r th e Nin thCir cu it . See Lin de r v. Dep ’t of Re v., 1 8 Or. Tax 11 , 15 n.4 (20 04 ) (co m

pa rin g Kem

p wi th Fit hi an ). The co urt i n Li nd er d idno t an al y ze the is su e, ho wev er, an d we d is ag ree tha t the law i s ambig uo us forth e reas on s s ta te d. Fu rth er, we are un aware of a ny oth er ca se s (p ub li sh edor unpubl is he d) th atco nc lu de th e te rm in at io n re qu ire m en t i s ambig uo us un de r Oreg on law.-9 -

[* 9] Bec au se we rejectres po nd en t’s d is al lo wan ce o f th e al im on y de du ct io n fo r th e supp ort p aym en ts , th ere i s n o u nd erp aym en t fo r 20 08 , andpe ti ti on er i s th eref or e n otli ab le forth e acc ur acy-rela te d p en al ty. W e h av e co ns id eredall th e arg um en ts of the parti es , and , to th e ex te ntwe ha ve no t ad dr es se d t he m , we fin d t he m to be irr el ev an t, m oo t o r m eri tl es s. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r pe ti ti on er.