TAX COURT OPINION

Case: James Robert Wilson
Docket Number: 461-07S
Judge: Colvin
Opinion Type: bench
Filed: 06/09/2008
Pages: 9

UNITED STATES TAX COURT Washington , D .C . 2021 7 JAMES ROBERT WILSON, Petitioner, v . Docket No . 461-07S COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 trial of the above case before Special Trial Judge Lewis R . Carluzzo at St . Louis, Missouri, on May 20, 2008, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be under Rule 155 . (Signed ) Lewis R. Carluzzo Special Trial Judg e Dated : Washington, D .C . June 9, 2008 SERVED JUN 10 2008 2 1 Bench Opinion by Special Trial Judge Lewis R . Carluzzo 2 May '20, 200 8 3 Wilson v . Commissioner Docket No . 461-07S 4 THE COURT : The Court has decided to render 5 oral findings of fact and opinion in this case, and 6 the following represents the Court's oral findings of 7 fact and opinion . The oral findings of fact an d 8 opinion shall not be relied upon as precedent in any 9 other case . 10 This proceeding for the redetermination of a 11 deficiency is a Small Tax Case conducted pursuant to 12 the provisions of Section 7463 of the Internal Revenue 13 Code of 1986, as amended, and Rules 170 through 175 of 14 the Tax Court Rules of Practice and Procedure . 15 This bench opinion is made pursuant to the 16 authority granted by Section 7459(b) of the Internal 17 Revenue Code of 1986, as amended, and Rule 152 of the 18 Tax Court Rules of Practice and Procedure . 19 Hereinafter in this bench opinion, unless 20 otherwise indicated, Section references are to the 21 Internal Revenue Code of 1986, as amended, in effect 22 for 2004 . Rule references are to the Tax Court Rules 23 of Practice and Procedure . 24 James Robert Wilson appeared pro se . 25 Michael W . Bitner appeared on behalf of Respondent . Heritage Reporting Corporatio n (202) 628-4888 3 1 In a notice of deficiency dated October 10, 2 2006, Respondent determined an $888 deficiency i n 3 Petitioner's 2004 federal income tax . The issue for 4 decision is whether a payment made by Petitioner to 5 his former spouse is deductible as alimony . 6 Some of the facts have been stipulated and 7 are so found . Petitioner resided in Illinois at the 8 time the petition was filed . 9 Petitioner and his former spouse wer e 10 married to and divorced from each in 1946 and 2004, 11 respectively . The latter event was effectuated by a 12 judgment for dissolution of marriage issued and filed 13 on April 19, 2004 by the Circuit Court for the 20th 14 Judicial Circuit of Washington County, Illinois (the 15 divorce decree) . In addition to dissolving th e 16 marriage between Petitioner and his former spouse, an d 17 among other things, the divorce decree addresses the 18 division of marital property . In this regard i t 19 incorporates the agreement between Petitioner and his 20 former spouse as to how numerous items of property and 21 assets were to be divided . 22 As relevant here in paragraph B5 of the 23 divorce decree, Petitioner is "ordered to reimburse" 24 his former spouse "the sum of $1,224 for her federal 25 income tax liability in order to equalize the ta x Heritage Reporting Corporation (202) 628-4888 4 1 payments ." This was done as a result of the manner in 2 which Petitioner and his former spouse filed thei r 3 2003 federal income tax returns ; that is, each as a 4 married individual filing a separate return . 5 Apparently filing the 2003 returns in that .manner 6 worked to the disadvantage of Petitioner' s former 7 spouse . 8 The division of various items of marital 9 property is addressed in the paragraphs (mor e 10 accurately subparagraphs) that precede paragraph B5, 11 as well as those that follow paragraph B5 . 12 Also relevant here is paragraph B38, which 13 provides that Petitioner and his former spouse wer e 14 each "self-supporting and shall be forever barred from 15 claiming maintenance from the other . " 16 The $1,224 payment referred to above was 17 made during 2004 (the payment) . On his timely filed 18 2004 federal income tax return, Petitioner included 19 the payment in the alimony deduction claimed on that 20 return . In the notice of deficiency that forms the 21 basis for this case , a significant portion of that 22 alimony deduction was disallowed . Respondent no w 23 concedes that, with the exception of the payment , 24 Petitioner is entitled to the alimony deduction shown 25 on his 2004 return . Heritage Reporting Corporation (202) 628-4888 5 1 According to Respondent , the payment may not 2 be deducted as alimony because it represents a 3 nondeductible division of property between Petitioner 4 and his former spouse . If only by implication , 5 Petitioner seems to agree that he is not entitled t o 6 deduct as alimony amounts paid to his former spouse in 7 order to divide their marital property or assets . See 8 Section 1041 . According to Petitioner, however, the 9 nature of the payment and the structure of the divorc e 10 decree suggests that the payment does not represent a 11 division of property . For the following reasons, and 12 under current law, we think it unnecessary to resolve 13 the dispute between the parties on this point . See, 14 e .g . Cunningham v . Commissioner , TC Memo 1994-474 . 15 In general , an individual is allowed t o 16 deduction amounts paid as alimony during the taxable 17 year to the individual spouse , or former spouse . Sec . 18 215 . A payment constitutes alimony within the meaning 19 of Section 215 if the payment is made in cas h 20 (including checks and money orders payable on demand, 21 Section 1 .71-1T( a), Income Tax Regs . , 49 Fed . Reg . 22 34455 ( August 9, 1989)), and (1 ) such payment i s 23 received by (or on behalf of) a spouse under a divorce 24 or separation instrument ; (2) the divorce o r 25 separation instrument does not designate such payment Heritage Reporting Corporatio n (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 as a payment that is not includable in the payee' s gross income under Section 71, and is not allowable a s a deduction to the payor under Section 215 ; (3) if th e individual and the spouse are legally separated, the y are not members of the same household ; and (4) the payor has no liability to make any such payment fo r any period after the death of the payee . Section s 71 (b) , 215(b) . If a payment between spouses, or forme r spouses, satisfies the above conditions, then th e payment constitutes alimony as defined for federa l income tax purpcses, regardless of whether th e obligation to make the payment more resembles a division of property than spousal support . In this case, it is clear that the $1,22 4 payment satisfies all but the last condition ; that is , whether Petitioner's obligation to have made th e payment would have terminated upon the death of hi s former spouse . See Sec . 71(b)(1)(D) . The divorc e decree is silent on the point, but the absence of an y express provisions is hardly determinative . In 1986, the Congress removed th e requirement from Section 71(b)(1)(D) that a divorce o r separation agreement specifically state that liability terminates upon the death of the payee spouse . Se e Heritage Reporting Corporation (202) 628-4888 7 1 Tax Reform Act of 1986, Pub . L . 99-514, Sec . 1843(b), 2 100 Stat . 2853 . Thus, payments now qualify as alimony 3 as long as the liability to make the paymen t 4 terminates automatically under state law . See Human 5 v . Commissioner , TC Memo 1998-106 . 6 Because the divorce decree does no t 7 expressly address Petitioner's liability to have made 8 the payment in the event of his former spouse's death, 9 we look to state law for guidance, which, in thi s 10 case, is Illinois . See Sampson v . Commissioner , 81 TC 11 614, 618 (1983), affd . per curiam without publishe d 12 opinion 829 F .2d 39 (6th Circuit 1987) . 13 Under Illinois law, unless otherwise agreed 14 by the parties in a written agreement set forth in the 15 divorce decree or otherwise approved by the divorc e 16 court, the obligation to pay future maintenance i s 17 terminated upon the death of either spouse . 750 ILCS 18 5/510(c) (2006 State Bar Edition) . In this case , 19 paragraph B38 of the divorce decree, portions of which 20 are quoted above, makes it clear that the payment does 21 not represent spousal maintenance and therefore is not 22 subject to the Illinois statute just referenced . 23 Petitioner has not called our attention t o 24 any other authority under Illinois law that would 25 establish his obligation to have made the payment Heritage Reporting Corporatio n (202) 628-4888 8 1 would have terminated upon the death of his former 2 spouse, and we have found none . 3 As we view the matter, Petitioner's 4 obligation "to reimburse" his former spouse a s 5 provided in paragraph B5 of the divorce decree was no 6 more eliminated by the death of his former spouse than 7 his obligation to make various other payments to he r 8 in accordance with the division of many other items of 9 marital property covered in other paragraphs o r 10 subparagraphs of the divorce decree . 11 Petitioner's point that the division of 12 marital property and his obligation to make th e 13 payment are contained in different sections of th e 14 divorce decree is simply not supported by a reading o f 15 that document . His obligation to make the payment is , 16 in fact, included among the many paragraphs tha t 17 address how various items of marital property are to 18 be divided . 19 Because it has not been established tha t 20 Petitioner's obligation to have made the payment would 21 not have terminated with the death of his forme r 22 spouse, the payment does not constitute alimony within 23 the meaning of Section 215 . Petitioner does no t 24 suggest that the payment is otherwise deductible, and 25 we are aware of no other provisions of the Internal Heritage Reporting Corporation (202) 628-4888 9 1 Revenue Code that would allow for it . 2 It follows that Petitioner is not entitled 3 to include the payment in the alimony deductio n 4 claimed on his 2004 return . 5 To reflect the foregoing, and Respondent' s 6 concessions of other amounts, decision will be entered 7 under Rule 155 . 8 This concludes the Court's oral findings of 9 fact and opinion in this case . 10 (Whereupon, at 4 :12 p .m ., the bench opinion 11 in the above-entitled matter was concluded . ) 12 13 // 14 // 15 // 1 6 17 // 1 8 19 // 20 // 2 1 22 23 // 24 // 25 Heritage Reporting Corporation (202) 628-4888