TAX COURT OPINION

Case: David B. Hawkins
Docket Number: 1443-08S
Judge: Colvin
Opinion Type: bench
Filed: 12/09/2008
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 2021 7 DAVID B . HAWKINS, Petitioner , v . ) Docket No . 1443-08S COMMISSIONER OF INTERNAL REVENUE , Respondent . Ju~3 7. bjj '/41 CAL . STAB' . FILE S 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 transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Laurence J . Whalen at Indianapolis, Indiana, containing his oral findings of fact and opinion rendered on November 4, 2008 . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) Laurence J. Whalen Judg e Dated : Washington, D .C . December 9, 2008 SERVED DEC 10 2008 3 1 Bench Opinion by Senior Judge Laurence J . Whalen 2 November 4, 200 8 3 Hawkins v . Commissioner Docket No . 1443-08S 4 THE COURT : The Court has decided to render oral 5 findings of fact and opinion in this case, and the 6 following represents the Court's oral findings of fact 7 and opinion . 8 This bench opinion is made pursuant to th e 9 authority granted by Section 7459(b) of the Interna l 10 Revenue Code, as amended, and Rule 152 of the Tax Court 11 Rules of Practice and Procedure . 12 In this bench opinion, all section numbers refer 13 to the Internal Revenue Code, as amended, and all rule 14 references are to the Tax Court Rules of Practice and 15 Procedure . 16 Mr . David B . Hawkins appeared on his own behalf . 17 Ms . Angela J . Kennedy, attorney-at-law, appeared o n 18 behalf of the Respondent . a 19 Respondent determined a deficiency of $1,515 i n 20 Petitioners's Federal income tax for the taxable year 21 2005 . The deficiency is attributable solely to th e 22 disallowance of the deduction for alimony paid claimed by 23 Petitioner on line 31a of his U .S . Individual Income Tax 24 Return on Form 1040 in the amount of $6,000 . 25 The issue for decision in this case is whether Heritage Reporting Corporatio n (202) 628-4888 4 1 Petitioner is entitled to deduct, as alimony, pursuant t o 2 Section 215(a), the aggregate amount paid during 2005 to 3 his ex-spouse under a Marital Settlement Agreement that 4 he executed with his ex- spouse . 5 Some of the facts have been stipulated , and they 6 are so found . Petitioner resided in Carmel, Indiana, at 7 the time the petition was filed . Previously, Petitioner 8 had lived in the State of California . 9 In 1998, the Superior Court of California entered 10 a judgment dissolving Petitioner' s marriage to his spouse 11 at the time, Ms . Nancy A . Hawkins . Ms . Hawkins i s 12 referred to herein as Petitioner' s ex-spouse . Petitioner 13 and his ex-spouse were married on August 31, 1986 . One 14 child was born to them in 1989 . 15 When Petitioner and his ex- spouse were divorced 16 the California court incorporated a Marital Settlement 17 Agreement into its judgment of dissolution . Petitioner 18 had entered into this agreement on or about April 10, 19 1998 . 20 The Martial Settlement Agreement, which we will 21 refer to as the settlement agreement , provides in part as 22 follows : 23 Cut-3 SPOUSAL SUPPORT : Spousal support amount is 24 included and incorporated into the amount of Famil y 25 Support amount agreed upon by both parties on page two of Heritage Reporting Corporatio n (202) 628-4888 5 1 this Agreement . 2 CHILD CUSTODY, VISITATION RIGHTS, AND SUPPORT : 3 Both parties to have joint legal custody of their minor 4 child T .M .H ., born '89, with Respondent (i .e . Mrs . 5 Hawkins) to have primary physical custody, and Petitioner 6 (i .e ., Mr . Hawkins) to have visitation at least two 7 weekends a month, alternate holidays and birthdays . 8 Additional visitation upon arrangement of both parties . 9 Petitioner to pay Respondent as and for Family 10 Support, the total sum of $500 per month based on 2 0 11 percent visitation, payable on the first and fifteenth of 12 each month, commencing 4-15-98, and continuing until the 13 minor child reaches the age of eighteen, or if said child 14 has not finished high school, until high schoo l 15 graduation, or age 19, whichever shall first occur ; 16 becomes emancipated ; marries, dies ; or further order of 17 the Court . A wage assignment will issue . 18 Petitioner agrees to maintain Medical coverage for 19 the minor child . Any unreimbursed medical, dental , 20 vision, et cetera, to be shared equally by both parties . 21 Child care costs are to be shared equally by both 22 parties . 23 Respondent to claim full tax exemption on Tax 24 Returns for minor . 25 MISCELLANEOUS : Petitioner shall keep a current Heritage Reporting Corporatio n (202) 628-4888 6 1 life insurance policy with daughter to be beneficiary fo r 2 her benefit and to be kept in trust for her until she 3 reaches legal age and to coincide with guideline child 4 support amount . Ce4 O4. 5 For convenience, we shall refer to the payments 6 made by Petitioner to his ex-spouse under the provision, 7 quoted above and entitled "Child Custody, Visitatio n 8 Rights and Support", as "support payments . " 9 Sometime,/ before 2005, Petitioner had voluntarily 10 agreed to increase the amount of the monthly support 11 payments to his ex-spouse to $600 per month . 12 Accordingly, during 2005, Petitioner made aggregate 13 payments of $7,200 to 1 }s ex-spouse . 14 Nevertheless, onVhis income tax return for the 15 year, he claimed a deduction for only $6,000, the amount 16 called for in the Agreement, as written . In thes e 17 proceedings, Petitioner has not sought to deduct the full 18 amount paid during the year . 19 In addition to support payments, Petitione r 20 maintained medical coverage for his daughter . He paid 50 21 percent of any unreimbursed medical, dental, vision, et 22 cetera, costs incurred by his daughter . He paid 5 0 23 percent of the child care costs that were incurred fo r 24 his daughter . He also maintained a life insurance policy 25 on his life for the benefit of his daughter . Heritage Reporting Corporation (202) 628-4888 7 1 Petitioner claims that $6,000 of the suppor t 2 payments he made during 2005 are deductible as alimony or 3 separate maintenance payments under Section 215(a) . H e 4 argues that the settlement agreement was drafted with the 5 intent of permitting him a deduction for the payments to 6 his ex-spouse , and the payments were allowed by th e 7 Internal Revenue Service during a prior audit . 8 He also argues that he supported his daughter 9 through other payments, specified by the settlement 10 agreement, such as his payment of 50 percent o f 11 unreimbursed charges for his daughter's medical, dental, 12 and vision needs . According to him, the support payments 13 were made to support his ex-spouse . 14 The term "alimony or separate maintenanc e 15 payment", collectively referred to as alimony, is an y 16 payment, as defined in Section 71(b), which is includable 17 in the gross income of the recipient under Section 71 . 18 Section 215(a) . Section 7A(b)(1) defines "alimony" a s 19 follows : 20 C 43 (1) In general .-The term "alimony or separate 21 maintenance payment" means any payment in cash if- 22 (A) such payment is received by (or on behalf of) 23 a spouse under a divorce or separation instrument , 24 (B) the divorce or separation instrument does not 25 designate such payment as a payment which is no t Heritage Reporting Corporation (202) 628-4888 8 1 includable in gross income under this section and not 2 allowable as a deduction under Section 215 , 3 (C) in the case of an individual legall y 4 separated from his spouse under a decree of divorce or of 5 separate maintenance , the payee spouse and the payo r 6 spouse are not members of the same household at the time 7 such payment is made, an d 8 (D) there is no liability to make any such 9 payment for any period after the death of the paye e 10 spouse and there is no liability to make any payment (in 11 cash or property) as a substitute for such payments after 12 the death of the payee spouse . DrJ Q" ak-. i 13 For a case involving the application of Section 14 71(b)(1)(D) to a divorce decree entered by a court i n 15 California, see Berry v . Commissioner , T .C . Memo 2005-91 16 (none of the divorce documents in the case provided for 17 the cessation of the payments to the payee spouse or 18 dealt with the contingency of her death) . 19 Furthermore, Section 71(c)(1) provides that the 20 general inclusion rule of Section 71(a) does not apply to 21 "that part of any payment which the terms of the divorce 22 or separation instrument fix (in terms of an amount of 23 money or a part of the payment) as a sum which is payable 24 for the support of children of the payor spouse . " 25 In this case, we are called upon to determine Heritage Reporting Corporatio n (202) 628-4888 9 1 whether the subject payments are alimony, which i s 2 deductible by the payor spouse under Section 215(a) and 3 includable in income by the payee spouse 's under Section 4 71(a), or child support, which is neither deductible by 5 the payor spouse nor includable in the payee spouse' s 6 income . 7 In my opinion, the terms of the settlemen t 8 agreement make it clear that the subject payments are in 9 the nature of child support, and pursuant to Sectio n 10 71(c)(1), are not within the definition of alimony . 11 The settlement agreement provides that th e 12 payments commence on April 15, 1998, and are to continue 13 "until the minor child reaches the age of 18 or if said 14 child has not finished high school, until high schoo l 15 graduation or age 19, whichever shall first occur ; 16 becomes emancipated ; marries, dies ; or further order of 17 the court . " 18 There is nothing in the settlement agreement which 19 discusses the death of the payee spouse, and there is no 20 reason to conclude that her death would cause th e 21 payments to cease, so long as none of the specified 22 conditions have taken place . 23 In order to give effect to our disposition of the 24 disputed issue, decision will be entered for Respondent . 25 This concludes the Court's oral findings of fact Heritage Reporting Corporatio n (202) 628-4888 1 and opinion in this case . 2 (Whereupon , at 4 :44 p .m ., the bench opinion in the 3 above - entitled matter was concluded . ) 1 0 4 5 6 7 / / 8 9 10 11 12 13 14 15 16 17 18 19 20 2 1 22 23 24 25 / / / / / / / / / / / / / / / / / / / / / / / / / / / / // Heritage Reporting Corporation (202) 628-4888