TAX COURT OPINION

Case: Frank Martin
Docket Number: 22831-08S
Judge: Colvin
Opinion Type: bench
Filed: 06/19/2009
Pages: 14

UNITED STATES TAX COURT WASHINGTON , DC 202 1 FRANK MARTIN, Petitioner , V . Docket No . 22831-08 S COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice an d Procedure, it is ORDERED that the Clerk of the CourlIt shall transmit herewith to petitioner and to respondent a copy bf the pages of th e transcript of the proceedings in the ab ve case before Judge Laurence J . Whalen at Tampa, Florida, c ntaining his oral findings of fact and opinion rendered o June 2, 2009 . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) Laurence J . Whalen Judge Dated : Washington, D .C . June 19, 2009 SERVED JUN 2 3 2009 3 1 Bench Opinion by Senior Judge Laurence J . Whalen 2 June 2, 200 9 3 Martin v . Commissioner Docket Number 22831-08S 4 I . 5 The Court has decide to render ora l 6 findings of fact and opinion in this case, and th e 7 following represents the Court 's oral findings of fact 8 and opinion . 9 II . 10 This proceeding was iheard as a Small Ta x 11 Case pursuant to the provision s of Section 7463 of the 12 Internal Revenue Code, as amended, and Rules 170 13 through 175 of the Tax Court Rules of Practice an d 14 Procedure . In this bench opinion, all section numbers 15 refer to the Internal Revenue ode, as amended and in 16 effect for 2006, the taxable year in issue, and al l 17 rule references are to the Tax Court Rules of Practic e 18 and Procedure . 19 III . 20 This bench opinion is made pursuant to the 21 authority granted by section 7459(b) and Rule 152 . 22 IV . 23 Mr . Frank Martin app ared on his own behalf . 24 Ms . Sarah R . Bolen, attorney at law, appeared o n 25 behalf of Respondent . Heritage Reporting Corporation (202) 628-4888 4 1 V . 2 Respondent determined a deficiency o f 3 $10,140 in Petitioner' s Federa 1 income tax for the 4 taxable year 2006 . The deficiency is attributabl e 5 principally to the disallowance of the deduction for 6 "alimony" that was claimed by Petitioner on line 31 a 7 of his U .S . Individual Income Tax Return in the amount 8 of $39,000 . 9 VI . 10 The only issue for decision in this case i s 11 whether Petitioner is entitled pursuant to section 12 215( a), to a deduction for alimony paid in the amount 13 of $39,000 as claimed on Petitioner ' s return for 2006 . 14 VII . 15 Some of the facts hale been stipulated, an d 16 they are so found . Petitioner resided in Wesley 17 Chapel, Florida, at the time tihe petition was filed . 18 Previously, Petitioner had lived in the State o f 19 California . 20 At the start of 2003, Petitioner was married 21 to Ms . Joyce Dujour Martin, w o is referred to herein 22 as Petitioner's ex-spouse . The couple had tw o 23 children, Frankie who was bor on September 13, 1989, 24 and Jonny who was born on November 15, 1992 . 25 The divorce proceedings that ende d Heritage Reporting (202) 628- Corporation 888 5 1 Petitioner' s marriage began in the Spring Of 2003 in 2 the Superior Court of Californ ~ ia . On or about 3 September 8, 2003, a Judge of the Superior Court, the 4 Honorable Steven R . Denton, is sued an order finding, 5 among other things : (1) that P etitioner's gros s 6 monthly income was $35,447 and, his net monthly incom e 7 was $28,249 ; (2) that Petitioner must pay monthl y 8 child support to his ex-spous e for Frankie and Jonny 9 in the amount of $2,117 and $3 ,529, respectively, a 10 total of $5,646, beginning August 1, 2003 ; and (3) 11 that Petitioner must pay spousal support to his ex- 12 spouse of $9,000 per month beg inning August 1, 2003 . 13 Approximately eight months later, on May 7 , 14 2004, the Superior Court of Ca lifornia issued another 15 order . In that order, the court noted that Petitioner 16 had been terminated from his employment on February 2, 17 2004 . Nevertheless, the California court did no t 18 relieve Petitioner of his obligation to pay to his ex 19 spouse monthly child support of $5,646 and monthl y 20 spousal support of $9,000 . To the contrary, the order 21 notes that Petitioner was due to receive from hi s 22 employer, McKesson Corporation, a severance payment of 23 $102,036, and unpaid commissioins(cid:127)of $30,208, a tota l 24 of $132,244 . The order state s "Averaging the 25 $132,244 severance over this f our-month perio d Heritage Reporting Corporation (202) 628-4888 1 provides Frank (i .e ., Petitioner) with approximately 2 the same income determined by the court in September 3 2003 . Accordingly, for the period of February 2004 4 through May 2004, Frank will cL,ntinue to pay -- $9,00 0 5 spousal support monthly and $5 646 child suppor t 6 monthly . " 7 The court order also states, "THAT the 8 parties will request McKesson o distribute $24,88 1 9 (i .e ., the amount Petitioner owed to his ex-spous e 10 through February 2004) from the $30,028 commissions . 11 Both parties will cooperate with McKesson and neither 12 party will force McKesson to distribute any wages due 13 and payable above the $14,646 age garnishment . " 14 The California superior court entered a 15 judgment dissolving Petitioner's marriage on March 30, 16 2005 . Attached to the judgment, and incorporate d 17 therein, is a Marital Settlement Agreement that had 18 been entered into by Petitioner and his ex-spouse on 19 the same day . 20 The Marital Settlement Agreement provides in 21 part as follows : 22 "3 .1 Monthly Child Support . on the first day of each 23 month, Frank must pay Joyce $6,646, or 11% (percent) 24 of his income for Child support . * * * 3 .7 Wage and 25 Earnings Assignment . At this time, Child suppor t Heritage Reporting Corporation (202) 628-4888 7 1 obligations have not been met Since June 2004 . Al l 2 monies from retirement, profit or other accounts tha t 3 have been directed to Joyce since June 2004, have 4 required legal intervention an have been her fai r 5 share which she has used for her and the children . A 6 wage assignment will be imposed on Frank upon th e 7 onset of employment to avoid further extended periods 8 of no support . * * * 4 .1 Monthly Spousal Support . 9 Spousal support will follow the guidelines set forth 10 by Judge Denton in September 8, of 2003 . On the first 11 day of each month, Frank must pay Joyce $9,000 .00, or 12 250 (percent) of his income for Spousal support . * * * 13 4 .6 Wage ad [sic ] Earnings Assignment . At this time 14 Spousal Support obligations ha e not been met sinc e 15 June 2004 . All monies from retirement, profit o r 16 other accounts that have been directed to Joyce since 17 June 2004, have required legal intervention and have 18 been her fair share . A wage ssignment will b e 19 imposed on Frank upon the onset of employment to avoid 20 further extended periods of no support' . " 21 The Department of Ch ild Support Services of 22 the County of San Diego issued a statement date d 23 September 1, 2006, to Petition er showing that he made 24 a payment of $3,755 to the De p artment on or about July 25 31, 2006 . The statement does not state whether that Heritage Reportin g (202) 628- Corporatio n 4888 8 1 payment was allocated to child support or spousa l 2 support . It also shows that, as of September 1, 2006, 3 Petitioner owed child support and spousal support in 4 the aggregate amount of $242, 7 68 .58 . 5 Respondent acknowled es that Petitioner made 6 additional payments during 20 6 directly to his ex- . Res 07 spouse totaling $11,000 ndent does not concede for alimony, as p 8 that any of these payments we r 9 opposed to child support . 10 VIII . 11 Petitioner's individ4,ial income tax retur n 12 for 2006 reported total income of $104,153 . 25% of 13 that amount is $26,038 .25 . As mentioned above , 14 Petitioner claimed a deduction under section 215(a) i n 15 the amount of $39,000 . 1 6 17 IX . The term "alimony . o r separate maintenanc e 18 payment," collectively referred to as alimony, is any 19 payment, as defined in section 71(b), which i s 20 includible in the gross income of the recipient under 21 section 71 . Section 215(a) . Section 71(b)(1) defines 22 "alimony" as follows : 23 (1) In general . -- T,e ter m 24 "alimony or separate maintenanc e 25 payment" means any payment in cas h Heritage Reporting Corporation (202) 628-, 888 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 24 9 if -- (A) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument, (B) the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215 , (C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made , and (D) there is no liab ility to make any such payment for any perio d after the death of he payee spouse and there is no liability to make any payment (in cash or property) as a subs, itute for suc h 25 payments after the death of the Heritage Reporting Corporation (202) 628- 888 1 0 1 payee spouse . 2 X . 3 There are four fundamental principles of tax 4 litigation that inform our decision in this case . 5 First, as a general rule, the Commissioner's 6 determinations are presumed correct, and the taxpayer 7 bears the burden of proving th t those determinations 8 are erroneous . Rule 142(a) . This principle wa s 9 firmly established by the Unit d States Supreme Court 10 as early as 1933 and has been recently reaffirmed by 11 the Supreme Court . See INDOPCO Inc . v . Commissioner , 12 503 U .S . 79, 84 (1992) . 13 We note that in certain circumstances, i f 14 the taxpayer introduces credib le evidence with respect 15 to any factual issue relevant to ascertaining the 16 proper tax liability, then sec tion 7491 places the 17 burden of proof on the Commiss ioner . Sec . 7491(a) . 18 Petitioner has not sought to shift the burden of proof 19 to Respondent nor has he introduced any evidence t o 20 establish any of the preconditions for the application 21 of section 7491 . One of those preconditions is a 22 showing that the taxpayer has maintained all records 23 required by the Internal Revenue Code . Sec . 24 7491(a)(2) . Petitioner could of make that showing in 25 this case . Accordingly, section 7491(a) does not Heritage Reporting Corporatio n (202) 628-4888 1 1 1 apply and the burden of proof remains on Petitioner . 2 Second, deductions are a matter o f 3 legislative grace, and a taxpayer must satisfy the 4 specific statutory requirements of the deductio n 5 claimed . E .g ., Deputy v . duPo t , 308 U .S . 488, 493 6 (1940) ; New Colonial Ice Co . J . Helvering, 292 U .S . 7 435, 440 (1934) . Additionally, a taxpayer is required 8 to substantiate the amount claimed as a deduction by 9 maintaining the records needed to establish such 10 entitlement . See generally sec . 6001 ; sec . 1 .6001- 11 1(a), Income Tax Regs . ; Hradesky v . Commissioner , 6 5 12 T .C . 87, 90 (1975), affd per c uriam 540 F .2d 821 (5t h 13 Cir . 1976) . 14 Third, the Court is not bound to accept the 15 unverified and undocumented testimony of a taxpayer . 16 E .g ., Hradesky v . Commissione2d , supra ; Tokarski v . 17 Commissioner , 87 T .C . 74, 77 (1986) . Even when a 18 taxpayers testimony is uncont overted, we are not 19 required to accept it if it i improbable , 20 unreasonable, or questionable . E .g ., Lovell & Hart, 21 Inc . v . Commissioner , 456 F .2d 145, 148 (6th Cir . 22 1972), affg . T .C . Memo . 1970 A 35 ; MacGuire v . 23 Commissioner , 450 F .2d 1239, 244 (5th Cir . 1971), 24 affg . T .C . Memo . 1970-89 ; Nie rin haus v . 25 Commissioner ; 99 T .C . 202, 212 (1992) . Heritage Reporting' Corporation (202) 628-4888 1 2 1 Fourth, a party's fa 'lure to introduce 2 documentary evidence that is w 'thin his possession o r 3 control and that he implies wo ld be favorable to him, 4 gives rise to the presumption that, if produced, such 5 evidence would be unfavorable . See, e .g ., Reckliti s 6 7 v . Commissioner , 91 T .C . 874, 890 (1988) ; Pollack v . Commissioner , 47 T .C . 92, (19 6 6), affd . 392 F .2d 40 9 8 (5th Cir . 1968) ; Wichita Termital Elevator Co . v . 9 Commissioner , 6 T .C . 1158, 11 6 5, (1946), affd . 16 2 10 F .2d 513 (lOth .Cir . 1947) . 1 1 12 XI . In this case, the threshold issue is whethe r 13 Petitioner has shown that he made payments .of $39,000 14 to his ex-spouse in 2006 . If any such payments were 15 made, the second issue is whether Petitioner has shown 16 that any of those payments made are deductible under 17 section 215(a) as alimony . 18 As to the first issue, we find tha t 19 Petitioner paid a total of $14,755 to his ex-spous e 20 during 2006 . This includes the payment of $3,755 tha t 21 was made on or about July 31, 2006, as reflected o n 22 the Department of Child Suppoljt Services statemen t 23 mentioned above . This also includes the additiona l 24 payments of $11,000 that were conceded by Respondent . 25 Petitioner's testimony that he paid more than $14,75 5 Heritage Reporting Corporation (202) 628-1,4888 1 3 1 to his ex-spouse is unsubstant fated . After a ful l 2 review of the record, we do not credit that testimony . 3 As to the second issue, we find that 4 Petitioner has not shown tha t any of the payments, 5 totaling $14,755, that were make to his ex-spouse 6 during 2006 were for alimony, Ls opposed to chil d 7 support . We do not credit Pet tioner's testimony tha t 8 the payments made to his ex-s p use in 2006 should b e 9 allocated to spousal support . 10 As we understand it , Petitioner asserts that 11 the order of the California S u erior Court filed on 12 May 7, 2004, reduced his aggr e ate support obligation, 13 such that he had no arrearage n 2006 when he made the 14 payments to his ex-spouse . H further asserts that, 15 notwithstanding the reduction , the Department of Child 16 Support Services continued inc rrectly to bill him for 17 aggregate support of $15,646 p r month, with th e 18 result that the balance show n n the Department o f 19 Child Support Services stateme t, $242,768 .58, is no t 20 correct . 21 We do not read the order of May 7, 2004, in 22 the same way Petitioner does . Nevertheless, whatever 23 the effect of that order, it i clear that the Marital 24 Settlement Agreement, executed by Petitioner on March 25 30, 2005, and incorporated into the judgment o f Heritage Reporting Corporation (202) 628-4888 1 4 1 dissolution, imposed a support obligation that wa s 2 equal to or greater than the support obligation unde r 3 the order of September 8, 2003 . The Marital 4 Settlement Agreement imposed a child suppor t 5 obligation of "$6,646 or 110 percent) of his income " 6 ($1,000 more than the order of September 8, 2003), and 7 a spousal support obligation of "$9,000 .00, or 25 % 8 (percent) of his income ." Furthermore, Petitioner has 9 produced nothing other than his unsubstantiate d 10 testimony to show that he challenged the ongoing 11 monthly charges of $15,646 made by the Department of 12 Child Support Services, or that he challenged th e 13 aggregate balance of his support obligation a s 14 computed by the Department . 15 What we have is our finding that Petitioner 16 made aggregate support payment s of $14,755 to his ex- 17 spouse in 2006 . The record cc ntains no reasonable 18 basis to conclude that those p ayments were fo r 19 alimony, as opposed to child support . Petitione r 20 bears the burden of proof on his issue and he failed 21 to sustain that burden . 2 2 23 XII . In order to give effect to our disposition 24 of the disputed issue, decisi n will be entered for 25 Respondent . Heritage Reporting' Corporation (202) 628-4888 1 XIII . 2 This concludes the C urt's oral findings o f 3 fact and opinion in this case . 4 (Whereupon , at 10 :36 a .m ., the bench opinio n 1 5 5 was concluded . ) 6 7 8 / / 9 10 11 12 13 14 1 5 16 17 18 19 20 21 22 23 2 4 25 Heritage Reporting (202) 628- Corporation 888