T.C. Summary Opinion 2006-92

UNITED STATES TAX COURT

JEFFREY ERCOLINO, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 14127-04S. Filed May 30, 2006.

Eugene F. Crowe (specially recognized), for petitioner.

William C. Bogardus, for respondent.

CARLUZZO, Special Trial Judge: This case for the

redetermination of a deficiency was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

at the time the petition was filed. Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for 2002. The decision to be entered is not reviewable by
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any other court, and this opinion should not be cited as

authority.

Respondent determined a $2,146 deficiency in petitioner’s

2002 Federal income tax and imposed a $429.20 section 6662(a)

penalty.

The issues for decision are: (1) Whether petitioner is

entitled to an alimony deduction; and (2) whether the

underpayment of tax required to be shown on petitioner’s 2002

Federal income tax return is due to negligence or intentional

disregard of rules or regulations.

Background

Some of the facts have been stipulated and are so found. At

the time the petition was filed, petitioner resided in Fresh

Meadows, New York.

Petitioner and Constanza E. Ercolino (petitioner’s former

spouse) married on June 10, 1995. They have at least one child,

who was born in July 1997. Petitioner and his former spouse

separated in December 1997; their marriage was terminated by

decree of divorce dated December 4, 2002. Relevant provisions of

the divorce decree (including documents adopted by reference and

incorporated into that decree): (1) Refer to the counterclaim

filed in the divorce proceeding by petitioner’s former spouse in

which she requested, among other things, an award of alimony

pendente lite and permanent alimony, (2) note that petitioner and
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his former spouse were advised by counsel; (3) establish that

pre-existing child support orders remain in effect; and (4)

provide that petitioner and his former spouse “mutually remise,

release, quit claim and forever discharge the other * * * from

any and all rights * * * including * * * any rights * * * which

either party may have for future spousal support or maintenance,

alimony, [or] alimony pendente lite”. Furthermore, in a document

incorporated into the divorce decree, petitioner and his former

spouse agreed that it was the “sole responsibility of each * * *

to sustain themselves without seeking any support from the

other”.

During their marriage and prior to their separation,

petitioner and his former spouse resided together in Stroudsburg,

Pennsylvania, in a house owned by petitioner, but subject to a

mortgage (the marital residence). Petitioner, the sole mortgagor

on the mortgage, apparently defaulted on the mortgage payments

prior to the year in issue. As a result, pursuant to foreclosure

proceedings the marital residence was sold on November 16, 2000. 

Following the foreclosure sale, petitioner’s former spouse and

child moved to a rented residence.

According to the stipulation of facts, on October 27, 1998,

petitioner’s former spouse “made a request for child support and

spousal support” of $250 per week. The record does not reveal to

whom the request was made or provide the outcome of the request. 
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By order dated May 28, 1999 (the May order), petitioner was

obligated to pay biweekly child support of $318.46, plus the

“entire mortgage” on the marital residence. As best can be

determined from the record, the reference to the “entire

mortgage” in the May order did not require petitioner to pay

completely the then-outstanding balance on the mortgage; rather

it required him to continue to make the then-in-effect $1,200

monthly mortgage payments (plus any arrearage). The May order

suggests that $600 (one-half) of the monthly mortgage payment is

attributable to petitioner’s former spouse and child, and he is

given credit for this amount against his “CSSA obligation” of

$1,290 per month support obligation otherwise determined in that

order. 

Taking into account various relevant factors under New York

law, petitioner’s monthly support obligation is expressly

calculated in the May order as follows: “$600 for payment of

mortgage [on the marital residence] for spouse and child --

leaving his support obligation of $690 per month or $318.46 biweekly”. 

At the time the May order was issued petitioner was

apparently making the mortgage payments directly to the

mortgagee. This changed at some point, and petitioner became

obligated to pay to his former spouse the $600 described above. 

This change is reflected in an order dated February 10, 2000 (the
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1 This amount is rounded, as $595.38 multiplied by 26 equals

$15,479.88.

2 Following the parties’ lead, we ignore respondent’s misuse

of the term “credit”.

February order), that supersedes the May order and establishes

petitioner’s support obligation at “$593.38 bi-weekly for one

child”. Mortgage payments are not referenced in the February

order. The biweekly payments totaling $15,4801 were withheld

from petitioner’s wages during the year in issue. 

Although the terms of the May order differ from the terms of

the February order, simple mathematics establishes that

petitioner’s support obligation as stated in terms of dollars and

cents did not change from one order to the next. The manner in

which petitioner treated support payments (including mortgage

payments made directly to the mortgagee or indirectly to his

former spouse) on his Federal income tax returns for years after

he separated from his former spouse, but prior to the year in

issue, has not been made part of the record. 

As relevant here, on his timely filed 2002 Federal income

tax return petitioner claimed a $7,800 alimony deduction. In the

notice of deficiency, respondent disallowed that deduction

because petitioner had “not provided verification * * * [he was]

entitled to the credit”.2 Respondent further determined that the

underpayment of tax required to be shown on petitioner’s 2002

return is due to negligence or intentional disregard of rules or
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3 For a discussion on this point, see, e.g., Grutman v.

Commissioner, 80 T.C. 464 (1983).

regulations and imposed a section 6662(a) accuracy-related

penalty. Other adjustments made in the notice of deficiency are

computational and need not be addressed.

Discussion

1. Alimony Deduction

Petitioner claimed a $7,800 alimony deduction on his 2002

return. As best can be determined from the record, this amount

represents petitioner’s estimate of how much of the $15,480

withheld from his wages and presumably paid to his former

spouse is allocable to other than child support, which

petitioner recognizes is not deductible as alimony. See secs.

71(c), 215. According to respondent, the entire amount

represents child support, and no portion is deductible as

alimony. 

It appears that the amount petitioner deducted as alimony

in some way or another is traceable to mortgage payments on the

marital residence that petitioner was required to make directly

to his former spouse after he separated from her.3 Although we

fail to fully comprehend petitioner’s position, we do not

hesitate to reject it for the simple reason that he made no

mortgage payments, directly or indirectly, on the marital

residence during 2002. The marital residence was foreclosed
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upon and sold in 2000. Petitioner attempts to avoid the

unavoidable consequence of this fact by suggesting that a

portion of the support obligation imposed in the February order

should be attributable to his obligation to pay a portion of

the rent incurred by his former spouse after moving from the

marital residence. See Marinello v. Commissioner, 54 T.C. 577

(1970). The terms of the February order, however, impose no

such obligation upon him.

Furthermore, petitioner’s position ignores the reality

that the February order expressly establishes petitioner’s

child support obligation at $1,290 per month. The May order

allowed him to offset $600 per month from this amount on

account of the mortgage payments made directly to the

mortgagee; the February order requires him to pay the full

amount directly to his former spouse, albeit through

withholding from his wages. Petitioner’s child support

obligation as established by the February order totals $15,480

per year, the amount withheld from his wages.

The February order apparently remained in effect as of the

beginning of 2002, and it continued in effect pursuant to the

divorce decree entered later that year. Neither the February

order, nor the divorce decree provide for any form of spousal

support or alimony to be paid by petitioner to his former

spouse during the year in issue.
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The $15,480 petitioner paid to his former spouse during

the year in issue constitutes child support; no portion of that

payment is allocable to alimony. Sec. 71(c). It follows that

petitioner is not entitled to an alimony deduction for 2002,

and respondent’s disallowance of that deduction is sustained.

2. Negligence Penalty

According to respondent, the underpayment of tax required

to be shown on petitioner’s 2002 return is due to negligence or

intentional disregard of rules or regulations. See sec.

6662(a), (b)(1), and (c). Respondent bears the burden of

production with respect to the imposition of the penalty. Sec.

7491(c).

In this case the “underpayment of tax” equals the

deficiency, which except for derivative computational

adjustments, results from the disallowance of the alimony

deduction discussed above. Secs. 6211, 6664(a); sec. 1.6664-

2(a), Income Tax Regs. Respondent argues that petitioner, by

deducting as alimony a portion of child support payments made

during the year in issue, was “negligent” within the meaning of

section 6662(a). 

Because the parties are well-versed in the controlling

principles, we see little point in burdening this summary

opinion with a detailed discussion of negligence, as that term

is used in the Internal Revenue Code. Suffice it to note that
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some of the facts in this case support the imposition of the

penalty. For example, the February order refers only to child

support, and the above-quoted portion of the divorce decree

establishes that petitioner’s former spouse waived any right to

alimony or spousal support. We assume that petitioner was well

aware of this as the divorce decree expressly states that he

was advised by counsel during the divorce proceedings. Be that

as it may, he claimed an alimony deduction.

On the other hand, we do not view the deduction here in

dispute to be one that “would seem to a reasonable and prudent

person to be ‘too good to be true’ under the circumstances”. 

Sec. 1.6662-3(b)(1)(ii), Income Tax Regs. Furthermore, other

than the nature of petitioner’s employment, the record contains

nothing about his “knowledge, experience and education”, sec.

1.6664-4(b), Income Tax Regs., that would have relevance to the

imposition of the penalty. 

Similarly, the record fails to disclose how petitioner

treated support payments made in prior years on his Federal

income tax returns for those years. The absence of such

information, coupled with references to “child and spousal

support” (emphasis added) in the stipulation of facts and May

order, undermines respondent’s position that the imposition
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of the section 6662(a) negligence penalty is appropriate in

this case.

On balance, we find that petitioner is not liable for the

section 6662(a) penalty.

Reviewed and adopted as the report of the Small Tax Case

Division.

To reflect the foregoing,

Decision will be entered

for respondent with respect to

the deficiency and for petitioner

with respect to the section

6662(a) penalty.