T.C. Su m m ary Op i n i o n 2 0 1 7 -3

UNITED STATES TAX COURT

M ARK A. QUINTAL, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 5 9 99 -1 5 S. Fi l edFeb ru ary 2 , 2 0 1 7
. Greg o ry J o n Ko l d y s, fo r p et i t i o n er. J an etF. Ap p el an d DerekW . Kel l ey , fo r res p o nd en t .

SUM M ARY OPINION GUY, Sp eci al Tri al J u d g e: Th i s cas e was h eard p u rs uan tt o t h e p ro v i s i o n s o f s ect i o n 7 4 63 o f the In t ern al Rev en u e Co de i n effect wh en t h e p et i ti o n was fi led
. 1 Pu rs u an tt o s ect i o n 7 4 6 3(b ), t h e d eci s i o n t o b e en t ered i s n o trev iewab l e b y

1 Un l es s o t h erwi s e i nd i cat ed , s ect io n referen ces are t o t h e In t ern al Rev en u e (co n ti n u ed ...)-2
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an y o t h er co u rt , an dth i s o p i n i o n s h al l n o tb e t reat edas p reced en t fo r an y o t h er cas e. Res p o n d en td et erm i n edth at p et i t i o n er i s l i ab l e fo r a Fed eral i n co m e t ax d efi ci en cy

o f $ 1 5 , 2 1 0 an dan accu racy -rel at edp en al ty u nd er s ect i o n 6 6 6 2 (a) o f $ 3 ,0 4 2 fo r each o f t h e t ax ab l e y ears 2 0 1 1 , 2 0 1 2 , an d 2 0 1 3 (y ears i n i ss u e). Pet i t io n er fi leda t i m el y

p et it i o n fo r red et erm i nat i o n wi t h t h e Co u rtp u rs u an tt o s ect i on 6 2 1 3 (a). Atth e t i m e th e p et i t io n was fi l ed , p et i t i o n er res i d edi n M as s ach u s et ts . Th i s cas e i s b efo re t h e Co u rto n res p o nd en t ’ s m ot i o n fo r s u m m ary ju d g m en t , wi t h a s up po rt i n g d ecl arat i o n , fi l edp urs u an t t o Ru l e 1 2 1. Pet i t io n er fi led ano p po s i t i o n t o m o ti o n fo r s u m m ary ju d g m en t, a m em o ran du m o f l aw, an da fi rs tam en d m en tt o m em o ran du m o f l aw. Th e p art i es ag ree t h att h ere i s n o d i s p u t e as t o an y m at eri al fact rel ev an tt o t h e d i s p o s i t i o n o f t h i s m at t er. Th e s o l e qu es t i on t o b e d eci d edi s wh et h er p aym en t s t h atp et i ti o n er m ad e t o M s . Gram l ich -Qu i n t al du ri n g th e y ears i n i s s u e co n s t i tu t e al i m o n y as d efi n edi n s ect i o n 7 1 (b ) t hath e i s en t i t l edt o d edu ctp u rs u an tt o s ect i o n 2 1 5
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1 (...co n t in u ed ) Co d e, as am en d edan di n effect fo r 2 0 1 1, 2 0 12 , an d2 0 1 3, an d Ru l e referen ces are t o the Tax Co u rtRu l es o f Pract i ce an dPro cedu re. M o n et ary am o u nt s are ro u n d ed t o the n eares td ol lar.-3
- Back g ro u nd 2 Pet i t i o ner an d M s. Gram l i ch -Qu i n t al m arri edo n Au g u st1 , 1 9 9 2 , an dt h ey h ad t h ree ch i l dren . Th ey l at er s ep arat edan dd i v o rced i n 2 0 1 0
. I. Sep arat i o n an d Pro p ert y Set t l em en tAg reem en t On Oct o b er 2 9 , 2 00 9 , p et i t i on er an dM s . Gram l i ch -Qu i nt al ex ecu t eda s ep arat i on an d p ro p ert y s et tl em en tag reem en t(s ep arat i o n ag reem en t ), wh i ch i n cl u d edex h i b i t s A th ro u g h M wh i ch were i n co rp o rat edi n t h e s ep arat i o n ag reem en tb y

referen ce. Th e s ep arat i o n ag reem en ts t at edt h atM s . Gram l i ch
Qu i nt al was award ed p h y si cal cu s t o d y o f t he t h ree ch i l d ren an dt h att h e p art i es i n t en d edth atth e s ep arat i o n ag reem en tres ol v e al l m at t ers b etween t h em , i n cl u d i n g p as t , p res en t , an dfu ture al im o ny an ds up p o rtan dm ai n ten an ce (ci t i n g M as s . An n . Laws ch . 2 0 8 , s ecs . 2 8 an d 3 4 (Lex i s Nex is 2 0 1 1 ), wh i ch refer t o ch i l d an ds p o u s al
s up p ort , res p ect i v el y ). Th e s ep arat i o n ag reem en tfu rth er s t at edt h att h e ch i l d ren

“ are s t i l l p ri n ci p al l y

d ep en d en tup o n t h e p art i es fo r s up p o rt an den t i t l ed t o s up p ort p u rs u an t t o p ro v i s i on s o f M GL, Ch . 2 0 8 , Sect
. 2 8 .” Befo re t h e s ep arat i o n ag reem en twas ex ecu t ed , p et i t i on er an dM s . Gram li ch -Qu i n tal en g ag edi n l as t -m i n u t e n eg o t i at io n s , an ds ev eral o f t h e ex h i b i t s

2 Th e fo l l o wi n g b ack g ro u n dfact s are n o ti n d i s pu t e an dare d rawn fro m th e p l ead i n g s an do th er d o cu m en t s m ak i n g up t h e reco rdi n t h is cas e.-4
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were s ub st an t i al l y

rev i s ed . Ins o m e i ns t an ces , en t i re p arag rap h s o f an ex h i b i twere l i nedthro u g h an drep l aced wi t h h an d w ri t t en s t at em en t s . Ex h i b i tA s t at edi n rel ev an tp art t hatp et i t i o n er wo ul dm ai n tai n h i s cu rren t h eal t h i n s u ran ce co verag e o r i t s equ i v al en tfo r t h e b en efi to f h i s ch il d ren as l o n g as each ch i l dwas “ u n em an ci p at edas t h att erm i s d efi n edh erei n .” Ex hi b i tA d i d
n o ti n cl u d e a d efi n i t i on o f th e t erm “ u n em an ci p at ed ”. Ex h i b i tB, o ri g i n al l y t i t l ed“ ALIM O NY”, was rev is edt o read “ Un al l o cat ed Sup p o rt ”. Ex h i bi t B s t at edi n p artt h atp et i t i o n er wo u l d “ pay t o * * * [M s . Gram li ch -Qu i n tal ] th e s um o f $ 9 0 0 .0 0 p er weekco m m en ci n g fo rt h wi th b y i m p l em en t edwag e as s i g n m en t . (See Ex h ib i tJ )” an dt h at“ [a] ny al i m o n y p aym en t s s h al l t erm i n at e” up o n t h e earl i er o f t h e d eat h o f p et i ti o ner o r M s . Gram l i ch
Qu i nt al o r t h e l at t er’ s rem arri ag e. Ex h i b i tB fu rt h er s t at edt h att he p art i es

“ ack n o wl ed ge t hath us b an dan t i ci p at es t h att h e ab o v e p aym en t i s d edu ct i b le t o h i m an di n cl u d ab l e t o wi fe”. Ex h i b i tJ was t i t l ed“ CUSTODY, SUPPORT, VISITATION”. Al t h o u g h
ex h ib i tJ o ri g i n al l y referred t o p et i t i o n er’ s o b l i g at i o n t o m ak e ch i l d s up po rt p aym en t s, t h ats t at em en twas l in edt h ro u gh an dwas rep l acedwi t h t h e p h ras e “ See Ex h ib i tB i m

p lem en t edwag e as s i g n m en tfo rt h wi t h .” Ex h i b i t J i ncl u d eda s t at em en tack n o wl ed g in g that , as a res ul to f d i s ab i l it i es , two o f t h e co up le’ s-5
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ch i l d ren m i g h tn ev er b eco m e s el f-s u ffi ci en to r em an ci p at edan d d efi n edt h e t erm

“ em an ci p at i o n ” o f t h e m i n o r ch i l d ren g en eral l y as o ccu rri n g o n t h e ch i l d ’ s d eat h , m arri ag e, en teri n g i n t o m i l i t ary s erv i ce, o r g radu at i o n fro m h i g h s ch o o l o r a fo u ry ear co l leg e p ro g ram . Ex h i b i tJ fu rt h er s t at ed : Sup p o rtas t o the ch i l das t erm ed i n t h i s ag reem en ts h al l en dup o n em an ci p at i on . In acco rd an ce wi t h Sect i o n 7 1 (b )(1 )(B) o f t he Co d e, t h e Hu s b an dan d W i fe ex p res s ly

ag ree t o d es i g n at e an dh ereb y d o d es i g n at e al l p aym en t s req u i redi n thi s Ex h i b i tas ex cl u d ab l e an d n on -d edu ct i b le p aym en t s fo r p u rp o s es o f Sect i o n s 7 1 an d2 1 5 o f th e Co d e, res p ect i v el y . It is ex p res s l y ag reed an du n d ers t o odt h at t h e p aym en t s m ad e b y t h e Hu s b an d t o the W i fe fo r s up p o rtu n d er t h i s Art icl e s h al l t erm i n at e up o n h i s d eat h an ds h al l n o t co n s ti tu t e a ch arg e upo n h i s es t at e i n t h at t h ere are t o b e l i fe i n s u ran ce t ru s t s es t ab l i sh edt o p ro v id e fo r t h e n eed s o f t h e ch i l d ren . Th e rem ai n d er o f ex hi bi tJ es t ab l i s h edt h e t erm s fo r cu s t o dy o f an dv i s i t at i o n wi t h t h e ch i l d ren . Th e Pro b at e an dFam i l y

Co u rto f M as s ach u s et ts (fam i l y co u rt ) en tered a J u d g m en to f Di v o rce Ni s i wh i ch i n co rp o rat edt h e s ep arat i o n ag reem en tan d t erm i n at edth e co up l e’ s m arri ag e effect i v e J an u ary 2 8 , 2 0 1 0
.-6
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On Oct o b er 2 2 , 2 01 4 , th e fam i l y co u rtfi l ed a s t i p u l at i o n fo r ju d g m en ti n res p o n s e t o M s . Gram li ch -Qu i nt al ’ s co m p l ai n tfo r m o di fi cat i o n an d p et i t io n er’ s co u nt ercl ai m . Th e s t i p u lat i o n fo r ju d gm en t, wh i ch was i nco rp o rat edi nt o t h e fi n al ju d g m en t , s t at edi n rel ev an t p art : “ Th att h e Fat h er p ay t o t h e M o t h er $ 9 0 0 p er weekas ch i l ds up p o rtfo r t h e p art i es ’ t h ree ch i l d ren .” II. Pet i t i on er’ s In co m e Tax Retu rn s Pet i t i o ner fi l edFed eral i n co m e t ax retu rn s fo r t he t ax ab l e y ears 2 0 1 1 , 2 0 1 2 , an d 2 0 1 3 , an do n each retu rn h e cl ai m eda d edu ct io n o f $ 4 6 ,8 0 0 fo r al i m o n y p ai d t o M s . Gram l i ch -Qu in tal . M s. Gram l ich -Qu i n t al , h o wev er, d i dn o trep o rtt h e p aym en t s as i n co m e o n h er t ax retu rn s. Di s cu ss i o n Su m m ary ju d g m en ti s i n t en d edt o ex p ed i te l i t i g at i o n an d av o i du n n eces s ary an d ex p en s i ve t ri al s. Fl a. Peach Co rp . v . Co m m i s s i o ner, 9 0 T.C. 6 7 8 , 6 8 1 (1 9 8 8 ). Su m m ary ju d g m en tm ay

b e g ran t edwi th res p ectt o al l o r an y p arto f t h e l eg al i s su es i n co n t ro v ers y

“ if t h e p l ead i n g s , an s wers t o i n t erro g at o ri es , d ep os i t i o n s , ad m i s s i o n s , an dan y

o t h er accep t ab l e m at eri al s , t o g et h er wi th t h e affi d av it s * * * , i f an y , s ho w th atth ere i s n o g en u i n e d i s p ut e as t o an y m at eri al fact an dt h ata d eci s i o n m ay

b e ren d ered as a m at t er o f l aw.” Ru l e 1 2 1 (b ).-7
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Sect io n 7 1 (a) p ro v i des t h e g en eral ru l e t h at g ro s s i n co m e i n cl u d es am o u n t s recei v edas al i m o n y

o r s ep arat e m ai n t en an ce p aym en t s. Sect i o n 2 1 5 (a) al l o ws a d educt i o n t o th e p ay o r fo r an am o u n tequal t o t h e al i m o ny p ai ddu ri ng t h e t ax ab l e y ear t o th e ex t en ti ti s i n cl u d ab l e i n t h e reci p ien ts p o u s e’ s g ro ss i nco m e u nd er s ect i on 7 1 (a). Wh et h er a p aym en tco n s t i tu t es al i m o n y i s d et erm i n edb y referen ce t o s ect i on 7 1 (b )(1 ), wh i ch d efi n es “ al i m o n y ” as an y cas h p aym en t i f (A) t h e p aym en t i s recei v edb y

a s po u s e u n d er a d i v o rce o r s ep arat io n i n st ru m en t , (B) t h e d i v o rce o r s ep arat i o n i n st ru m en t d o es n o td es i g n at e s uch p aym en t as a p aym en twh i ch i s
n o ti n cl u d ab l e i n g ro ss i n co m e u n d er s ect io n 7 1 an dn o tal lo wab le as a d edu ct i o n
u n d er s ect i o n 2 1 5 , (C) t h e p ay or an d p ay ee s p ou s es are n o t m em b ers o f t h e s am e h o u s eh o l dwh enth e p aym en ti s m ad e, an d(D) t h e p aym en to b l i g at i o n t erm i n at es atthe d eat h o f t h e p ay ee s p o u s e an dt here i s n o l i ab i l i t y t o m ak e ei t her a cas h o r a p ro p ert y p aym en tas a s ub s t i tu t e fo r t h e p aym en taft er th e d eat h o f t h e p ay ee s p o u se. Sect io n 7 1 (c)(1 ) p ro v i d es th e g en eral ru le t h ats ub s ect i o n (a) s h al l n o tap p l y t o that p arto f an y

p aym en t wh i ch t h e t erm s o f th e d iv o rce o r s ep arat i o n i n s t ru m en t fi x (i n term s o f an am o u n to f m o n ey o r a p arto f t h e p aym en t ) as a s u m wh i ch i s p ay ab l e fo r t h e s up po rto f ch il dren o f t h e p ay o r s p o us e. Un d er s ect i o n 7 1(c)(2 ),-8
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h o wev er, i f an y

am ou n ts p eci fi edi n t h e d i vo rce i ns t ru m en t “ wi ll b e red uced ” o n t h e h ap p en i n g o f a co n t i n gen cy s p eci fi edi n t h e i n s t ru m en tt h atrel at es t o a ch i l do f t h e p ay o r s p o u s e, t h en an am o un tequ al t o t h e am o u n t t h at“ wi ll b e red u ced ” i s t reat ed as fi x edas a s u m

p ay ab l e fo r t h e s up p o rto f t he ch i l d ren o f th e p ay o r s p o u se. Ev en t s thatrel at e t o a ch i l do f t he p ay o r s p o u se i n cl ud e t h e ch i l d’ s at t ai n i n g a s p eci fi edag e o r i n co m e l ev el , dy i ng , m arry i n g , l eav i n g s ch o o l , l eav i ng t h e p ay ee s p o u s e’ s h o u s eh o l d, o r g ai n i n g em pl o ym en t . Sec. 7 1 (c)(2 )(A). Res p o n d en tco n ced es th atp et i t i o ner’ s s up po rtp aym en t s t o M s . Gram l i ch
Qu i nt al s at i s fy

th e requ i rem en t s o f s ub p arag rap h s (A), (C), an d(D) o f s ect i o n 7 1 (b )(1 ). Res p o n d en tco n t en d s , h o wev er, t h at p et i t i o n er’ s p aym en ts d o n ot
co n st i tu t e al i m o n y

b ecau s e, co nt raryt o s ub p arag rap h (B) o f s ect i o n 7 1 (b )(1 ),
ex h ib i tJ (i n co rp o rat edb y referen ce i n t h e s ep arat i o n ag reem en t ) s t at es : “ In
acco rd an ce wi t h Sect i o n 7 1 (b )(1 )(B) o f t he Co de, t h e Hu s b an dan d W ife ex p res s l y ag ree t o d es i g n at e an dh ereb y d o d es i g n at e al l p aym en t s req ui redi n t h is Ex h i b i tas ex cl u d ab l e an dn o n -d edu ct i b l e p aym en t s fo r p u rp o s es o f Sect io n s 7 1 an d 2 1 5 o f t h e Co d e, res p ect i v el y . ” In th e al t ern at i v e, res p on d en tag ai n p o i n t s t o ex h i bi tJ an dm ai n tai n s t h at , b ecau s e th e u n al l o cat eds up p o rtp aym en t s are s ub j ectt o co n t i n gen ci es i n v o l v i n g-9
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p et i t i o n er’ s ch il d ren , th ey are co n s i d ered p aym en t s m ad e fo r th e s up p o rto f p et i t i o n er’ s ch il d ren i n acco rd an ce wi t h s ect i o n 7 1 (c)(2 ). Pet i t i o ner rel i es o n ex h i bi tB o f t h e s ep arat i o n ag reem en t , wh i ch ex p res s ly p ro v id es fo r “ u n al l o cat ed s up p o rt ” p aym en t s , as o p p os edt o al i m o n y o r ch i l d
s up p ortp aym en ts . No t i ng th atex h i b i tJ d o es n o tex p res s l y req u i re an y

fo rm o f p aym en t , p et it io n er av ers th atth e s t at em en ti n ex h i b i tJ t h at res p on d en trel i es up o n i s n o trel ev an tt o th e qu es t i o n w h et h er t h e d i s p u tedp aym en t s co n s t i tu te al i m o n y . Pet i t io n er fu rt her as s ert s th atth e p art i es ’ l as t -m i n u t e n eg o t i at i o ns an d rev i s i o n s t o t h e s ep arat i o n ag reem en t were i n t en d edt o en s u re t h att he d i s p u t edp aym en t s wo u l db e t reat edas al i m o n y fo r p u rp o s es o f s ect i o n s 7 1 an d2 1 5. As an i n i t i al m at t er, we reject p et i ti o n er’ s co n t en ti o n t h atwe s h o u l d
ev al u at e h i s an d M s . Gram li ch -Qu in t al ’ s i n t en t reg ard i n g t h e ch aract eri zat i o n o f t h e d i s p u t edp aym en t s . As we h av e ex p lai n edi n t h e p as t : “ Co n g res s el i m i n at ed
an y co n si d erat i o n o f i n t en t i n d et erm i n i n g t h e d edu ct i b i l i t y o f a p aym en tas al i m o n y i n fav o r o f a m o re s t rai g h tfo rward , o b ject iv e t es t t h atres t s en t irel y o n th e fu l fi l l m en t o f ex p li ci treq u i rem en t s s etfo rt h i n s ect i o n 7 1
. ” See Ok ers o n v . Co m m i s s i o n er, 1 2 3 T.C. 2 5 8 , 2 6 4 -2 6 5 (2 0 0 4) (ci t i n g Ho o v er v . Co m m i s s i o n er, 1 0 2 F.3 d8 4 2, 8 4 4 -8 45 (6 t h Ci r. 1 9 9 6 ), aff’ g T.C. M em o . 1 99 5 -1 8 3 ).-1 0
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Un d er th e ci rcu m st an ces , we fo cu s o n t h e requ i rem en t i n s ect i o n 7 1 (b )(1 )(B) t h atth e s et t l em en tag reem en tn o ts t at e th att h e p aym en t i s n ei t h er i n cl u d i b l e i n g ro s s i n co m e n or al l o wab l e as a d edu ct io n . W e ackn o wl ed ge, as p et i t i o n er co n t en d s , th atex h ib itJ d oes n o tex p res s l y req u ire an y

p aym en to r o t h erwi s e fi x an am o u n tt o b e p ai das al i m on y o r ch i l ds up po rt . Pet it i o n er’ s
n arro w fo cu s o n th is as pect o f ex h i b i tJ , h o wev er, g i v es n o effect t o t h e cro s s -referen ces i n ex h i b i ts B an dJ . As we s ee i t , a p ro p er co n s i d erat i on o f t h e s ep arat i on ag reem en treq u i res a co n s t ru ct i o n o f t h e d o cu m en tas a wh o l e, i n cl u d i n g th e ex h i b i t s an dthe cro s s -referen ces wi t h i n t h e ex h i b i t s . “ Wh ere a s ep arat i on ag reem en ts et s th e p art i es ’ s up p o rt o b l i g at i o n s , th e l an g u ag e o f t h e co n tract , i f p l ai n an du n am b i gu o u s , m

u s tb e co n s t ru edi n acco rd an ce wi t h i t s o rd i n ary an du s u al s en s e.” Sh aw v . Tu rco t t e, 9 22 N.E.2 d1 7 9 , 2 0 1 0 W L 5 65 3 8 8 , at* 2 (M as s. Ap p . Ct . 2 0 1 0 ) (qu o t i n g Lars o n v . Lars o n , 2 8 M as s . Ap p . Ct . 3 3 8 , 3 4 0 (1 99 0 )). Read i n g th e s ep arat i o n ag reem en tas a wh o l e, we co n cl u de t hatex h i b i t s B
an d J m u s tb e read i n t an d em

an dt h att h e u n al l o cat eds up p o rtp aym en t s p res cri b ed i n ex h ib i tB are s ub

ject to th e p ro v i s i o n s o f b o t h t h at ex hi b i tan dex h i b i tJ . Inth i s reg ard , th e h an d wri t t en rev i s io n s t o t h e s et t l em en tag reem en twere p oo rl y co n cei v ed . Sp eci fi cal ly , al t h o u g h ex h i b i t B was rev i s edt o s t at e t hatt h e p art i es-1 1
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“ ack n o wl ed ge t hath us b an dan t i ci p at es t h att h e ab o v e [u n al lo cat eds up p o rt ] p aym en t i s d edu ct i b l e t o h i m an di n cl u d ab l e t o wi fe” (em p h as i s ad d ed ), ex h i b i tJ
s t at es m o re d efi n i t i v el y : “ In acco rd an ce wi t h Sect i o n 7 1 (b )(1 )(B) o f t h e Co d e, t h e Hu s ban dan dW i fe ex p res sl y ag ree t o d es i g n at e an dh ereb y d o d es i g n at e al l p aym en t s req u i redi n thi s Ex h ib i tas ex cl u d ab l e an d n on -d edu ct i b le p aym en t s fo r p u rp os es o f Sect i o n s 7 1 an d2 1 5 o f t h e Co d e, res p ect i v el y .” W e co n cl u d e t h atth e l at t er, m o re d efi ni t i v e s t at em en tco n t ro l s i n t h i s cas e. Becau s e t h e s et t l em en t ag reem en tp ro v id es th at t h e u n al l o cat eds up p o rt p aym en t s are ex cl u d ab l e fro m i n co m e an d n o t al l o wab l e as d edu ct io n s, i tfo l l o w s t h att h e p aym en t s d o n o ts at i s fy t h e d efi n i t i o n o f al i m o n y u n d er s ect io n 7 1(b )(1 )(B). Acco rd i n gl y , we co ncl u d e t h atres p o n d en t i s en ti t l edt o ju d g m en t as a m at t er o f l aw s u s t ai ni n g t h e d et erm i n at i o n s s etfo rt h i n th e n o t i ce o f d efi ci en cy . 3 To refl ectthe fo reg o i n g , An ap p ro p ri at e o rd er an dd eci s i o n wi l l b e en t ered
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3 Un d er t he ci rcu m s t an ces , we n eedn otco n s id er res p o n d en t ’ s al t ern at i v e arg u m en tth atth e u n al lo cat eds up p o rtp aym en t s co ns t i tu te ch il d s up p o rtp aym en t s u n d er s ec. 7 1 (c)(2 ).