* Wesley Brown, Senior United States District Judge for the District of

Kansas, sitting by designation. 

## F I L E D United States Court of Appeals Tenth Circuit 

### JUN 18 2002 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

JOHN H. LOVEJOY, Petitioner - Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent - Appellee. No. 00-9031

Appeal from the United States Tax Court

(No. 8158-97)

Thomas G. Hodel of Doussard Hodel & Markman, P.C., Lakewood, CO, for Petitioner-Appellant. Teresa T. Milton, Attorney, Tax Division (Jonathan S. Cohen, Attorney, Tax Division, with her on the brief), Department of Jus tice, Washington D.C., for Respondent-Appellee.

Before SEYMOURand EBEL , Circuit Judges, and BROWN , * Senior District Judge.

EBEL , Circuit Judge.2

Petitioner-Appellant John H. Lovejoy appeals the ta x court’s determination that certain support payments he made to his ex-spo use during divorce proceedings were not deductible under the Internal Revenue Code. The payments were unallocated, meaning there was no designation as to whether they applied to child support (which is not deductible) or spousal maintenance (also known as alimony, which is deductible). This case turns on whether Lovejoy’s obligation to make these payments would have terminated automatic ally had his spouse died; they qualify as deductible alimony only if they wou ld have so terminated. Because we predict that the Colorado Supreme Court would hold that these payments would not automatically terminate on the d eath of Lovejoy’s spouse, we conclude that Lovejoy has not met his burden of sho wing that the payments are deductible. We therefore AFFIRM the tax court. * * * * We have jurisdiction to review the tax court’s deci sion under I.R.C. § 7482(a)(1) “in the same manner and to the same extent as decisions of the district courts . . . tried without a jury.” We th erefore review the tax court’s legal conclusions de novo and its findings of fact for cl ear error. Consolidated Mfg.,
Inc. v. Comm’r , 249 F.3d 1231, 1236 (10th Cir. 2001). Lovejoy be ars the burden of showing that he is entitled to a deduction. Lov e Box Co. v. Comm’r , 842 F.2d 1213, 1216 (10th Cir. 1988).3

Under I.R.C. § 215(a), a taxpayer is “allowed as a deduction an amount equal to the alimony or separate maintenance paymen ts paid during such individual’s taxable year.” The term “alimony or s eparate maintenance payment” is defined as “any payment in cash if”:

(A) such payment is received by (or on behalf of) aspouse under a divorce or separation instrument, (B) the divorce or separation instrument does not d esignate such payment as a payment which is not includible i n gross income under this section and not allowable as a de duction under section 215, (C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate mai ntenance, the payee spouse and the payor spouse are not membe rs of the same household at the time such payment is made, an d (D) there is no liability to make any such payment for any period after the death of the payee spouse and ther e is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse. I.R.C. § 71(b)(1). In addition, § 71(c)(1) provides that “any payment which the terms of the divorce or separation instrument fix (in terms of a n amount of money or a part of the payment) as a sum which is payable for the supp ort of children of the payor spouse” is not includible in the recipient’s income . Such payments include “amounts specified in the instrument [that are to b e] reduced . . . on the happening of a contingency specified in the instrum ent relating to a child (such as4

attaining a specified age, marrying, dying, leaving school, or a similar contingency).” § 71(c)(2). Thus, Lovejoy may dedu ct payments to his ex-spouse only if the payments bothmeet the alimony definition in § 71(b)(1) and are not child support within the meaning of § 71(c)(1) or ( c)(2). There is no dispute that Lovejoy’s payments to his ex-spouse were cash and meet the requirements of § 71(b)(1)(A)-(C). The pr inciple question is whether they satisfy § 71(b)(1)(D) – whether Lovejoy would have been obligated to continue with the payments if his ex-spouse had die d. As originally enacted in 1984, § 71(b)(1)(D) requir ed that this absence of continued liability be stated explicitly in the div orce court’s order. In a “technical correction” in 1986, Congress removed th e requirement that this be expressed in the order. Payments now satisfy § 71( b)(1)(D) when the divorce order is silent if background principles of state l aw mandate that the payments necessarily terminate upon the death of the payee s pouse. See generallyHoover
v. Comm’r , 102 F.3d 842, 845-47 (6th Cir. 1996); Zinsmeisterv. Comm’r , 80 T.C.M. (CCH) 774 (2000). Because neither the tempo rary orders nor the permanent orders in this case expressly state wheth er Lovejoy’s obligations would continue in the event his ex-spouse died, we look t o Colorado law. Colorado has adopted the Uniform Dissolution of Marriage Act (“UDMA”), which states that “[u]nless otherwise agreed in wri ting or expressly provided in5

the decree, the obligation to pay future maintenanc e is terminated upon the death of either party.” Colo. Rev. Stat. § 14-10-122(2) (emphasis added). Conversely, the obligation to pay child supportdoes not terminate upon the death of the custodial parent. Abrams v. Connolly , 781 P.2d 651, 656-57 (Colo. 1989) (en banc). The disputed question on appeal is whether, under Colorado law, the death of a recipient automatically terminates the spouse’ s obligation to make unallocatedpayments such as those at issue in this case. The tax court ruled that it does not. There is no Colorado law squarely addressing the tr eatment of unallocated payments upon the death of the payee spouse. The o nly on-point cases cited by the parties address California law and are conflict ing. Compare Heller v.
Comm’r , 103 F.3d 138, 1996 WL 713049, at *3 (9th Cir. 199 6) (unpublished) (holding that the obligation to pay unallocated sup port would automatically terminate upon the recipient’s death), and Ambrose v. Comm’r , 71 T.C.M. (CCH) 2429 (Mar. 14, 1996) (same), withWells v. Comm’r , 75 T.C.M. (CCH) 1507 (Jan. 5, 1998) (holding that the obligation does not term inate upon death). This split of authority interpreting California law is no help to Lovejoy’s attempt to show that Colorado law provides for the termination of unallo cated payments upon the payee spouse’s death.6

Lovejoy also gains no support from Commissioner v. Lester , 366 U.S. 299 (1961), in which the Supreme Court held that a diss olution agreement “providing for . . . periodic payments must specifically state the amounts or parts thereof allocable to the support of the children” in order to avoid classification as alimony. Id. at 301. The governing statute at that time specif ically provided that periodic payments received by a wife pursuant to a dissolution agreement were “‘includible in the gross income of such wife’” unl ess the agreement’s terms “‘fix . . . a portion of the payment, as a sum whic h is payable for the support of minor children of such husband.’” Id. at 301 n.1 (quoting I.R.C. § 22(k) (1939)).
Lesteris unhelpful to our current inquiry because the st atutory requirement that the dissolution agreement itself must explicitly al locate a portion of the payment as child support in order for it to be so considere d was later deleted from the statute. In its place, Congress enacted the statut ory test found in § 71(b)(1). Given that Lesterdid not consider this new statutory test, it is of no assistance to Lovejoy, who must meet the new statutory test in or der to prevail. Lovejoy’s strongest argument is that his ex-spouse’ s death would have divested the family court of jurisdiction over the divorce action. Therefore, he argues, the temporary order would have abated and h e would have had no continuing obligation to make the unallocated payme nts required by that order. In Colorado, as in most jurisdictions, it is true that , upon the death of a party during7

the pendency of a divorce action and before a final decree of dissolution is entered, “‘the general rule of law is that a divorce action immediately a bates.’” In re Marriage of Connell , 870 P.2d 632, 633 (Colo. Ct. App. 1994) (emphasis added) (quoting Estate of McLaughlin v. Craig , 184 P.2d 130, 132 (Colo. 1947)). However, Colorado law provides that “provisions forthe support of a child are [not] terminated . . . by the death of a parent obl igated to support the child.” Colo. Rev. Stat. § 14-10-122(3); see also Abrams , 781 P.2d at 656-57 (holding that custodial parent’s death does not terminate no n-custodial parent’s child support obligations set forth in dissolution decree ). It is not clear under Colorado law which rule trump s the other – i.e., whether the abatement of dissolution proceedings up on a spouse’s death would negate temporary orders providing for child supportpayments. However, we are inclined to believe that the Colorado Supreme Courtwould hold that temporary orders providing for child support payments, even w hen included within a general unallocated payment obligation, do survive the deat h of the recipient spouse. If one spouse dies after a dissolution decree is enter ed, the court retains jurisdiction to resolve other matters raised in the proceedings. See Burford v. Burford , 935 P.2d 943, 954 (Colo. 1997) (en banc) (citing other Colorado cases holding: 1) no abatement upon death of spouse before permanent ord ers entered as long as parties agreed the marriage was irretrievably broke n; and 2) no abatement when8

death occurred while dissolution orders were on app eal). Further, as the tax court recognized, the unallocated support payments requir ed by the temporary order were to continue “until further Order of Court.” T here is no reason to believe that the death of a spouse negates this language. The need for child support, which is encompassed bythe unallocated payments, will frequently continue beyond the death of the custodial spouse, as reflected in Colorado’s requirement that allocated child support continue after the custodial parent’s death. If the obligation to mak e unallocated payments for the benefit of a child ceased at death, and if the nonc ustodial parent was not immediately given custody of the children, there wo uld be a substantial risk that the children would be without support for some peri od of time, until a new order could be obtained. This potential hardship to the children is to be avoided under Colorado law. Cf. Colo. Rev. Stat. § 14-10-102(1), (2)(b) (stating t hat the Colorado divorce laws should be liberally construedto “mitigate the potential harm to the spouses and their children caused by th e process of legal dissolution of marriage”). The relevance of these policy consi derations does not hinge on whether a final divorce decree has been entered. Admittedly, there is a substantial likelihood that the parent making unallocated payments will be overpaying for a perio d of time after the death of the recipient spouse until he or she can have the s upport order modified because9

the unallocated payments include maintenance for th e deceased spouse. This amount, however, presumably is one that the paying parent can reasonably afford. Cf. id. §§ 14-10-114 (2)(f), -115(1)(e) (stating that the ability of a paying parent to make maintenance and child support payments is r elevant to setting the level of support required). Moreover, the paying parent – w ho has been a party to the underlying divorce proceedings – is likely to be in a better position to ask for a modification of the court orders than any other cus todian of the children (for example, the relatives of the deceased spouse), who may not have been involved in those proceedings. And the paying parent could protect his or her interests from the start by asking the court to include speci fic provisions in the support order for tax purposes. Finally, if the paying par ent became the custodial parent, it should not be difficult to get the court to elim inate the unallocated payments entirely. However, even if we are incorrect in predicting that the Colorado Supreme Court would hold that temporary unallocated paymentobligations for both child support and spousal maintenance survive the death o f the recipient spouse, we would still uphold the tax court’s opinion. Lovejo y bore the burden of proving that his obligation to make unallocated payments wo uld cease upon his exspouse’s death. Because the divorce court orders are silent and Colorado law is at best unclear on the issue, and likely contrary to L ovejoy’s position, he has failed10

to meet this burden. See Hoover , 102 F.3d at 848 (“Given the ambiguity of the then-applicable state law as to the termination of payments, we hold that Ohio law does not ‘save’ the payments in question for purpos es of § 71(b)(1)(D).”). Given our conclusion that Lovejoy has failed to est ablish that the unallocated payments qualify as alimony under § 71( b)(1), we need not determine whether any portion of the payments qualify as chil d support under § 71(c)(1). The unallocated payments were not deductible, and t he tax court’s judgment is
AFFIRMED.