Opinion ID: 3052864
Heading Depth: 2
Heading Rank: 1

Heading: analysis

Text: We “review decisions of the Tax Court under the same standards as civil bench trials in the district court. Therefore, conclusions of law are reviewed de novo, and questions of fact are reviewed for clear error.” Milenbach v. Comm’r, 318 F.3d 924, 930 (9th Cir. 2003) (internal citation omitted). “The interpretation and meaning of contract provisions are questions of law reviewed de novo.” Id. [1] The Internal Revenue Code requires that “alimony or separate maintenance payments” be included in taxable gross income. See 26 U.S.C. § 71(a). The Code provides a four-part definition of “alimony or separate maintenance payments”: (1) In general.—The term “alimony or separate maintenance payment” means any payment in cash if— 12094 JOHANSON v. CIR (A) such payment is received by (or on behalf of) a spouse under a divorce or sepa- ration instrument, (B) the divorce or separation instrument does not designate such payment as a pay- ment 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 liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse. Id. § 71(b)(1). Subsection (D), the only part of this definition at issue in this appeal, thus requires that for payments to be deemed alimony, there must be no liability to continue payments after the death of the payee spouse. See id. § 71(b)(1)(D). Otherwise, the payments are deemed a disguised property division, neither taxable to the payee nor deductible by the payor. A support agreement that does not explicitly provide that payments terminate upon the death of the payee spouse can nevertheless satisfy § 71(b)(1)(D) if the payments terminate in the event of the payee spouse’s death by operation of state law. See Kean v. Comm’r, 407 F.3d 186, 191 (3d Cir. 2005); Lovejoy v. Comm’r, 293 F.3d 1208, 1210 (10th Cir. 2002); Barrett v. United States, 74 F.3d 661, 664 (5th Cir. 1996); Hoover v. Comm’r, 102 F.3d 842, 846-48 JOHANSON v. CIR 12095 (6th Cir. 1996); Zinsmeister v. Comm’r, 80 T.C.M. (CCH) 774 (2000); see also I.R.S. Notice 87-9, 1987-1 C.B. 421. Where “state family law is ambiguous as to the termination of payments upon the death of the payee, a federal court will not engage in complex, subjective inquiries under state law; rather the court will read the divorce instrument and make its own determination based on the language of the document.” Hoover, 102 F.3d at 846; see also Kean, 407 F.3d at 191 (declining to delve into the “intricacies” of state family law). In this case, state family law is unambiguous as to the termination of payments upon the death of the payee, so we need not make an independent determination. [2] Here, the Agreement does not explicitly provide whether Weiler’s liability to make monthly payments to Johanson continues after her death. Under California law, “[e]xcept as otherwise agreed by the parties in writing, the obligation of a party under an order for the support of the other party terminates upon the death of either party or the remarriage of the other party.” Cal. Fam. Code § 4337. A written agreement to waive section 4337 “must be specific and express.” In re Marriage of Thornton, 115 Cal. Rptr. 2d 380, 383 (Ct. App. 2002).1 While “[n]o particular words are required . . . silence will not do.” Id. (quoting In re Marriage of Glasser, 226 Cal. Rptr. 229, 230 (Ct. App. 1986)). Mere failure to include death as a terminating event does not constitute waiver of section 4337. Id. at 385. [3] However, where there is “language in the written agreement reasonably susceptible to interpretation as a declaration of an intent that support continue beyond [death],” extrinsic evidence is admissible in order to determine whether the writ- 1 Although Thornton involved the remarriage provision of § 4337, we follow California cases that have indicated that the death and remarriage provisions of section 4337 should be interpreted in a similar fashion. See, e.g., In re Marriage of Cesnalis, 131 Cal. Rptr. 2d 436, 439 (Ct. App. 2003). 12096 JOHANSON v. CIR ten agreement waived section 4337. In re Marriage of Cesnalis, 131 Cal. Rptr. 2d 436, 439-40 (Ct. App. 2003) (finding a non-modification statement “expressly limited to the . . . ‘duration of spousal support’ ” to warrant such analysis of extrinsic evidence). In Cesnalis, the question was whether spousal support payments would continue in the event of the payee spouse’s remarriage. Id. at 438. Similar to the language in the Cesnalis agreement, the agreement here contains specific non-modification statements related to the duration of the spousal support payments that are “reasonably susceptible to interpretation” as an agreement to continue payments after Johanson’s death. See id. at 439-40. Therefore, extrinsic evidence was admissible on the question of whether the parties waived the statutory termination of spousal support on the payee’s death. See id. at 439. Under California law, Johanson “bears the burden of proving, by clear and convincing evidence” that there is a written agreement to continue the spousal support payments beyond Johanson’s death. Id. The Tax Court did not clearly err in holding that the extrinsic evidence proffered by Johanson failed to meet this standard. That language explicitly providing for the termination of the spousal support payments at “the death of either party” was deleted from a prior version of the Agreement does not clearly and convincingly establish that the parties agreed in writing that the payments to Johanson would continue past her death. That the parties obtained life insurance on Weiler’s life to secure the spousal support payments does not shed any light on what the parties agreed to in the event of Johanson’s death. The fact that Weiler continues to pay spousal support after Johanson remarried does not constitute a written agreement regarding the status of payments in the event of Johanson’s death. [4] The Tax Court did not clearly err in ruling that Johanson failed to prove by clear and convincing evidence that she and Weiler agreed in writing that the spousal support payments would continue past her death. Consequently, Weiler’s JOHANSON v. CIR 12097 payments to Johanson were correctly found to be alimony, and therefore, taxable to Johanson.2 The decision of the Tax Court is AFFIRMED. 2 We do not address Johanson’s estoppel argument raised in her reply brief because the Tax Court did not consider it, Johanson did not raise it in her opening brief, and the Commissioner did not discuss the issue. See United States v. Ullah, 976 F.2d 509, 514 (9th Cir. 1992).