TAX COURT OPINION

Case: Terry Kassien
Docket Number: 24852-09
Judge: Colvin
Opinion Type: bench
Filed: 12/15/2010
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM TERRY KASSIEN, Petitioner, v. ) Docket No. 24852-09 COMMISSIONER OF INTERNAL REVENUE, Respondent. O R D E R Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall petitioner and to respondent a copy of transcript of Diane L. Kroupa at Los Angeles, California on December 2, 2010, containing her oral the above case before Judge the proceedings of findings of fact and opinion. the pages of transmit the to In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. December 15, 2010 SERVED Dec 15 2010 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 Bench Opinion by Judge Diane L. Kroupa December 2, 2010 Kassien v. Commissioner Docket Number 24852-09 THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE AND THE FOLLOWING REPRESENTS THE COURTS. ORAL FINDINGS OF FACT AND OPINION. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. All section references are to the Internal Revenue Code and all Rule references are to the Tax Court Rules of Practice and Procedure. Terry Kassien appeared pro se and Linette B. Angelastro appeared on behalf of respondent. FINDINGS OF FACT Certain facts have been stipulated. The stipulation of facts, with accompanying exhibits, are admitted andsso found. Petitioner and his ex-wife divorced in November 2004 after-nine years of marriage during which two children were born. Petitioner was ordered to pay specified amounts pursuant to the divorce judgment, including a payment of $50,000 to his ex-wife's attorney that was ordered under Cal. Heritage Reportinig Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 Fam. Code sec. 2030. Petitioner filed for bankruptcy 11 days after the divorce. Petitioner's ex-wife filed an adversary proceeding against petitioner in the bankruptcy case. The bankruytcy court found that certain obligations of petitioner to his ex-wife were non-dischargeable in bankruptcy. Specifically, the bankruptcy court found that the obligation to pay $50,000 in attorney's fees was non-dischargeable as a domestic support obligation. Petitioner paid the $50,000 directly to his ex-wife. Petitioner claimed a $108,744 alimony deduction for amounts he paid to his ex-wife during 2006. Respondent issued a statutory deficiency notice to petitioner dated September 28, 2009 determining a $19,742 deficiency in petitioner's Federal income tax by disallowing $60,744 of alimony that petitioner claimed. Petitioner timely filed a petition to contest the deficiency determination. At the time he filed the petition, petitioner resided in California. Petitioner now concedes that $4,573 of the ~ amount he claimed on his return may not be deducted. Respondent has conceded that an additional $6,171 of the amount petitioner claimed may be deducted. The only amount in dispute is whether the payment of $50,000 for attorney's fees may be deducted as Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 alimony. OPINION The sole issue for decision is whether the $50,000 payment pätitioner made to his ex-wife to cover her attorney's fees are deductible as alimony. We now address the deductibility of this payment. An individual is allowed a deduction equal to the alimony or separate maintenance payments paid during the individual's taxable year. Sec. 215(a). The term "alimony or separate maintenance payment" is defined in section 71(b) . There are six requirements under section 71(b) for payments to be treated as alimony. Many payments by a spouse for the ex-spouse's attorney's fees fail to qualify as alimony because they do not satisfy the requirement that payments terminate upon the payee-spouse's death. Sec. 71(b) (1) (D). Petitioner bears the burden of proving that the payments satisfy all requirements to qualify as alimony. Rule 142(a). Petitioner has offered no evidence that his obligation to pay the $50,000 attorney's fees would end at his ex wife's death. See Megibow v. Commissioner, T.C. Memo. 1998-455; Smith v. Commissioner, T.C. Memo. 1998-166. Indeed, this Court has specifically found that awards of attorney's fees Heritage Reporting Corporation (202). 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 6 under Cal. Fam. Code sec. 2030 in California domestic relations proceedings survived the death of the spouse to whom the fees were awarded. See Stedman v. Commissioner, T.C. Memo. 2008-239; Ribera v. Commissioner, T.C. Memo. 1997-38. Petitioner has given us no reason to find otherwise in this case. Instead, petitioner emphasizes that the bankruptcy court did not discharge his obligation to pay the attorney's fees because it found the obligation was a domestic support obligation. It is well settled that labels assigned to a payment are not conclusive for Federal income tax purposes. See Yoakum v. Commissioner, 82 T.C. 128, 140 (1984). We find that the bankruptcy court's determination that the $50,000 was non-dischargeable in bankruptcy has no relevancy for determining whether it is deductible for tax purposes. The determination rests instead on all of the surrounding facts and circumstances. See Ribera v. Commissioner, supra. Petitioner has not met his burden of demonstrating that the divorce judgment, the bankruptcy judgment or State law would terminate his obligation to pay the attorney's fees upon his ex-wife's death. Petitioner also argues that the Court should not consider whether the $50,000 would have been Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 payable after his ex-wife's death because he already paid that amount. In other words, he suggests that the hypothetical question of obligation is irrelevant because the payment has been made. We disagree. The issue is whether petitioner's obligation to pay the attorney's fees was conditioned on the ex-wife's survival. The existence of this condition is the relevant consideration, regardless of the timing of the payment. See, e.g., Megibow v. Commissioner, supra. Accordingly, we find that petitioner's $50,000 payment for his ex-wife's attorney's fees is not deductible alimony for Federal income tax purposes. To reflect the foregoing and the parties' concessions, decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 3:34 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // Heritage Reporting Corporation (202) 628-4888