TAX COURT OPINION

Case: Richard W. Augustynowicz
Docket Number: 16277-10S
Judge: Goeke
Opinion Type: bench
Filed: 11/09/2011
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 RICHARD W. AUGUSTYNOWICZ, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R .D E. R Docket No. 16277-10S. Pursuant to Rule 152 (b) , TÄx 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 transcript of the trial in the above case before Judge Joseph Robert Goeke at Hartford, Connecticut, on October 28, 2011, containing his oral findings of the trial. fact and opinion rendered at 's the pages of the conclusion of In accordance with the oral findings of fact and opinion, a decision will be entèred for petitioner. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. November 9, 2011 SERVED NOV 10 2011 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 Bench Opinion by Judge Joseph Robert Goeke Augustynowicz v. Commissioner Docket No. 16277-10S October 28, 2011 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. Rule references in this opinion are to the tax court rules of practice and procedure. Section references are to the Internal Revenue code. This case was heard pursuant to the provisions of Section 7463 of the Internal Revenue code in effect when the petition was filed. Pursuant to Section 7463(b) the decision to be entered is not reviewable by any other court. Jurisdiction in this case is based upon our jurisdiction under Section 6213(a) to review the deficiency determinations of the respondent, the Commissioner of Internal Revenue. Respondent made deficiency determinations in the present case by issuing a notice of deficiency to the petitioner, and the petitioner has timely filed a petition seeking review of respondent's determination. The notice of deficiency was issued on June 21st, 2010 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 and asserted that deficiency in the amount of $3,824, which was based upon an adjustment to income in the amount of $14,833.55, which was the disallowance of a portion of the alimony expense claimed by the petitioner on his federal income tax return for 2007. Petitioner claimed alimony expense of $27,136. Respondent allowed $12,302.45 of the amount claimed. This opinion is rendered orally pursuant to Rule 152 and Section 7459(b). The petitioner was a resident of Connecticut when he filed his petition in this case. He married Millie Morales on May 12th, 1984. On May 15, 2007 Ms. Morales filed a petition for divorce in Connecticut Superior Court. The divorce was granted on August 31st,. 2007. A dissolution of marriage was entered at the time the divorce was granted. The dissolution of marriage incorporated by reference a separation agreement. The terms of this separation agreement constitutes the primary basis of the dispute between the petitioner and the respondent. Article 7 of the separation agreement provided in Paragraph 7.1 that the petitioner shall make payments on his former spouses credit card debt for a Mastercard. The credit card statements demonstrate that the balance at the time the divorce decree was 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 entered was $14,833.91. Petitioner's payment of this balance represents the adjustment in the notice of deficiency, and is disputed on the basis that respondent maintains that pursuant to Section 2.3 of the separation agreement petitioner's obligation to make this payment would've survived the hypothetical death of his former spouse. Petitioner maintains that respondent does not dispute the characterization of this payment as alimony by the state court, which the state court subsequently clarified after the divorce, which was entered as an order by the State Family Court of Connecticut in March of 2010 after an agreement was reached between petitioner and his former spouse reflecting the fact that the payment of the credit card debt balance should be characterized as alimony for Connecticut purposes. As stated, respondent's position is focused on the application of Paragraph 2.3 of the separation agreement. This paragraph provides that "all the covenants, promises, stipulations, agreements, and provisions herein contained shall be binding upon and inure to the benefit of the heirs, executors, administrators, personal representatives, and assigns of each party, whether so expressed or not." 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 First we note that respondent apparently has conceded that this paragraph does not apply to the amounts covered by the alimony payments which respondent. has not adjusted in the amount of $12,302. The parties have stipulated that these alimony payments took place in 2007 and were made directly to petitioner's ex-spouse over the three month period from September to December, 2007. Petitioner asserts that Section 2.3 is not applicable to the Mastercard payment in question. Finally, as a factual matter we note that the Mastercard liability was solely of the petitioner's former spouse, and he was not listed as a party obligated to make the Mastercard payment by Mastercard itself. For purposes of our analysis we presume that the petitioner has the burden of proof, which he did not maintain otherwise at trial. An individual such as the petitioner may generally deduct payments made during the taxable year to a spouse to the extent that the payments are alimony that is includable in the spouse's gross income. Section 215(a) and (b) payments are alimony under the Internal Revenue code when each of the following requirements is met. 1; the payments are made in cash. 2; the payments are received by the spouse under a divorce or separation Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 7 instrument. 3; the divorce or separation instrument does not provide that the payments are not reportable as alimony. 4; the spouse's reside in separate households at the time the payments are made. 5; the spouse's do not file a joint return, and 6; the payors spouse's liability for the payments or for making other payments in substitute for those payments does not conti!nue for any period after the payee spouse's death. 71(b) (1) and Okerson, 0-K-E-R-S-O-N v Commissioner, 123 U..). 250 trikc -thüt-- 123TC 258, 263 (2004). ~~7Å(cid:16)254(cid:16)254UPAEhÎT -A-fvrttre-r dispute focuses solely on the point whether the petitioner's obligation to make the payments would've continued for any period after his former spouse's death, and accordingly focuses solely on whether the respondent is correct in asserting that Paragraph 2.3 of the separation agreement applies to the credit card payments, which petitioner made pursuant to the separation agreement. We find no basis to distinguish the credit card payments from the amounts respondent has allowed regarding the application of Section 2.3, and in both instances we read the separation and specifically clause 2.3 to be inapplicable to the payments in question because these.payments were in the nature of Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 1,0 11 12 alimony and were not in the nature of a property settlement. Our determination that the payments were in the nature of alimony under state law is consistent with respondent's position as well as with the arguments made by the petitioner, and is consistent with the actions of the family court in 2010. Since we have determined that Section 2.3 of the separation agreement is inapplicable to the payments in question the clause is inapplicable to the amounts the respondent has-previously-allowed-inythi-s~case. There's no issue remaining et the inapplicability of this section makes the payments an obligation of . 13 the petitioner only during the lifetime of his spouse 14 15 16 17 18 19 20 21 22 23 24 25 since the obligation he.was paying was in the name of his former spouse. The parties have not argued otherwise, and specifically respondent has not maintained that apart from Section 2.3 of the separation agreement petitioner's obligation would've survived the death of his former spouse. Given our determination a decision will be entered for petitioner in this case. This concludes the courts oral findings of fact and opinion. (Whereupon, at 11:12 a.m., the bench opinion in the above-entitled matter was concluded.) // Heritage Reporting Corporation (202) 628-4888