Court Opinion

ID: 4617172
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:36:02.506891+00
Date Added: 2024-06-11T07:55:15.629198
License: Public Domain

Beulah Weil, Petitioner, v. Commissioner of Internal Revenue, Respondent.  * Charles S. Weil, Petitioner, v. Commissioner of Internal Revenue, Respondent.  Charles S. Weil and Adreana Weil, Petitioners, v. Commissioner of Internal Revenue, RespondentWeil v. CommissionerDocket Nos. 43366, 43858, 50411United States Tax Court22 T.C. 612; 1954 U.S. Tax Ct. LEXIS 171; June 22, 1954, Filed June 22, 1954, Filed *171 Decisions will be entered under Rule 50.  1. Charles and Beulah Weil entered into an agreement which was incident to a decree of divorce. Charles agreed to pay premiums on insurance policies insuring his life.  The policies were delivered to Beulah for safekeeping.  Held, on the facts, that none of the insurance policies were assigned to Beulah, and she did not become the owner of any of them; her interest in them was contingent. Held, further, that the amounts of premiums paid by Charles are not part of periodic payments within section 22 (k) of the Internal Revenue Code and, therefore, they are not deductible under section 23 (u) of the Code.2. The agreement made provision for periodic payments for the support of Beulah and their two minor children. The amount of the total periodic payments which Charles is required to make each year depends upon the amount of his net income for the preceding year so that the total amount may fluctuate from year to year.  However, the agreement fixes $ 800 per month, or $ 9,600 per year, as the norm, or basic amount, which Charles is obligated to pay, which amount may be adjusted upward to $ 12,000 or down to $ 5,000.  Also, if Beulah*172  remarries, Charles will not be obligated to continue periodic payments for her support, but he will be obligated to continue to make payments for the support of his children in the amount of $ 200 per month for each child, or $ 400 per month for two minor children. Held, on the facts, that the agreement is to be read in its entirety.  Held, further, that the agreement fixes part of the periodic payments in terms of 50 per cent for two minor children, or 25 per cent for one child of periodic payments as a sum which is payable for the support of minor children of Charles.  Accordingly, in the taxable years 50 per cent of the required periodic payments is properly to be excluded, under section 22 (k) from Beulah's income, and 50 per cent cannot be deducted from Charles' income under section 23 (u).  Charles Kurz, C. P. A., for the petitioner Beulah Weil.Hiram S. Gans, Esq., for the petitioners Charles S. Weil and Adreana Weil.Richard G. Maloney, Esq., for the respondent.  Harron, Judge.  HARRON *613  The Commissioner has determined that there are deficiencies in income tax as follows:DocketPetitionerYearOriginalIncreasedNo.deficiencydeficiency43366Beulah Weil1947$ 1,762.59$ 2,584.1643858Charles S. Weil19472,126.9250411Charles S. Weil and Adreana Weil1948731.10794.98*173  The Commissioner has made claim, under section 272 (e) of the Code, for increases in deficiencies as follows: In Docket No. 43366, he has made claim for an increase of $ 821.57, making the total deficiency $ 2,584.16; and in Docket No. 50411, he has made claim for an increase of $ 63.88, making the total deficiency $ 794.98.In Docket Nos. 43858 and 50411, claims are made that there are overpayments of income tax for 1947 and 1948.The issues in these proceedings involve sections 22 (k) and 23 (u) of the Internal Revenue Code.One issue presents the question whether the amounts of insurance premiums paid by Charles S. Weil in 1947 and 1948, for insurance on his life, come within section 22 (k) and represent additional alimony payments to Beulah Weil.  The Commissioner, by his amended answer, has determined that Beulah Weil (Docket No. 43366) is taxable under section 22 (k) for $ 1,278.72, insurance premiums paid by her former husband pursuant to an agreement, as additional alimony. Charles S. Weil (Docket Nos. 43858 and 50411) claims in his petitions additional deductions under section 23 (u) for insurance premiums paid in 1947 and 1948 in the amounts of $ 1,278.72 and $ 1,322.41, *174  respectively.Another issue presents the question whether the sum of $ 4,800, a part of total periodic alimony payments made by Charles S. Weil to Beulah Weil in 1947 and 1948, constitutes a sum fixed, or specifically designated in an agreement incident to divorce "as a sum which is payable for the support of minor children of" Charles S. Weil within the meaning of section 22 (k) so that the sum of $ 4,800 is neither taxable to Beulah Weil under section 22 (k) nor deductible by Charles S. Weil under section 23 (u).  Beulah Weil contends that $ 4,800 is fixed in the agreement as a sum for the support of the minor children and, therefore, is not taxable to her in 1947.  Charles S. Weil claims that he is entitled to deduct $ 4,800 in each of the years 1947 and 1948 because the agreement did not fix any sum for the support of his minor children. The Commissioner, in order to protect the revenue, has made inconsistent determinations.  He has determined in the case of Beulah Weil that no part of the periodic payments to her by her *614  former husband were fixed in the agreement incident to their divorce as a sum payable for the support of their minor children so that, under section*175  22 (k), she is not entitled to exclude from periodic payments taxable to her the sum of $ 4,800.  He has determined in the cases of Charles S. Weil, that the sum of $ 4,800 represents a sum fixed for the support of his minor children so that he is not entitled, under sections 22 (k) and 23 (u), to deduct $ 4,800 in 1947 and 1948, along with the rest of the alimony payments he made to Beulah Weil in those years.In Docket No. 43858, Charles S. Weil, there is a further question whether a payment of $ 500 which he made to Beulah Weil on January 16, 1947, was part of the 1947 periodic alimony payments due to Beulah Weil under the agreement.  Charles S. Weil contends that the deduction allowable under section 23 (u) should include the disputed payment of $ 500.  Beulah Weil contends that it is not taxable to her under section 22 (k) because it was a reimbursement for part of her 1946 income tax.In Docket No. 43858, Charles S. Weil, it is now conceded that Charles S. Weil is not entitled to include in his allowable deduction under section 23 (u), the sum of $ 490.  Effect will be given to this concession under Rule 50.FINDINGS OF FACT.The facts which have been stipulated are found accordingly. *176  The stipulation of facts is incorporated herein by this reference.Beulah Weil, hereinafter referred to as Beulah, is a resident of New York City.  Her individual return for 1947 was filed with the collector for the third district of New York.Charles S. Weil, hereinafter referred to as Charles, maintains his office in New York City.  His individual return for 1947 and his joint return for 1948 were filed with the collector for the second district of New York.  Adreana Weil, the present wife of Charles, is involved in these proceedings only because a joint return was filed for 1948.  None of the questions presented relate to her.Beulah and Charles were married in 1928.  They have two sons: Charles, born in 1928; and Donald, born in 1930.  In 1947, Charles was 19 years old, and Donald was 17 years old.On August 24, 1940, Beulah obtained a decree of divorce, in Idaho, from Charles.  Prior to the divorce on August 9, 1940, Beulah and Charles entered into a separation agreement, which is sometimes referred to hereinafter [ILLEGIBLE WORD] the agreement.  The decree of divorce referred to the agreement; it was incident to the decree of divorce. Under the divorce decree, Beulah was awarded*177  the custody of the minor children. The agreement is incorporated herein by this reference.*615  At all times since her divorce, Beulah has remained unmarried.  During 1947 and 1948 the two children, Charles and Donald, were unmarried and they resided with Beulah.Issue 1: Insurance Premiums.Article 12 of the agreement provides as follows:TWELFTH: The Husband represents that he has heretofore insured his life, according to certain policies of life insurance which are enumerated in Schedule A annexed hereto and hereby made part hereof, in order to provide for the support and maintenance of the Wife and support, maintenance and education of the children after the death of the Husband.  At the time of delivery of this agreement, the Husband will deliver said policies to the Wife and the Wife shall promptly put said policies in a safe deposit box for safe keeping.  The Husband covenants and agrees that he will at all times hereafter maintain said insurance in full force and effect; that he will promptly and punctually pay the premiums thereon as and when they shall become due and payable respectively.  In the event that the Wife shall remarry during the lifetime of the *178  Husband, irrespective of the validity of such remarriage, or in the event that the Wife shall predecease the Husband, all her interest in all said insurance policies shall terminate forthwith and the Husband shall become entitled to the immediate possession and control of said insurance and insurance policies. Upon the remarriage of the Wife after the death of the Husband, one-half of the proceeds and benefits of said insurance shall be payable to her and one-half to all children of the Husband.  The Husband agrees that he will not assign, transfer or encumber said policies or any of them and that he will not surrender or in any other manner change the benefits or terms of said policies during the lifetime of the Wife or until her remarriage, without her written consent.On August 9, 1940, Charles wrote a letter to Beulah in which he advised her, inter alia, as follows:In connection with the provisions of paragraph Twelfth of our said agreement, * * *.  I further agree that the provisions of said paragraph Twelfth with respect to your remarriage during my lifetime are designed to divest your interest in the said insurance policies but are not intended to give me complete control*179  over said policies, and I agree that I will continue to maintain said policies in force for the benefit of our children, except that if I have any other children, I may change the beneficiary provisions of said policies so as to include such other children.  I further agree that, without your written consent, no child of mine by any subsequent marriage shall have any greater share in the proceeds of said insurance than is given to each of our children.Beulah accepted and agreed to the matters set forth in the letter of August 9, 1940.The insurance upon Charles' life, referred to in Article 12, consisted of six policies of the Equitable Life Assurance Society.  Four policies, each 20-payment policies in the total face amount of $ 10,000 ($ 2,500 each), were fully paid prior to January 1, 1947.  The other two policies are family income policies as follows: No. 11,111,525, dated January 28, 1940, face amount $ 15,000, monthly income $ 150; and No. 10,984,645, dated September 8, 1839, face amount $ 30,000, *616  monthly income $ 300.  These two policies are incorporated herein by this reference.  Charles paid the premiums due on the two family income policies in 1947 and 1948. *180  Pursuant to Article 12, Charles delivered all of the insurance policies to Beulah and she has retained them in her possession.  However, no changes were made in the policies themselves.  On September 18, 1940, the Equitable Life Assurance Society was notified that a separation agreement had been entered into between the insured, Charles S. Weil, and the former wife, Beulah, and that to insure his performance of his covenant with Beulah, to at all times maintain the policies of insurance in full force and effect and to do the other things agreed upon, Charles S. Weil had delivered the policies to Beulah Weil.  Equitable was advised, also, that no changes had been made in the policies and that no change could be made in the policies without the consent of Beulah Weil.The primary beneficiary of each of the family income policies was and is Beulah Weil; the children, Charles and Donald, are the remainder beneficiaries.Equitable did not receive a copy of the agreement of August 9, 1940, between Charles and Beulah Weil.Each of the family income policies contains the provision that "No assignment of this policy shall be binding upon the Society or deemed to be in force unless in writing*181  and until filed at its Home Office." Charles S. Weil did not execute any written assignment of any of the policies to Beulah Weil.During 1947 and 1948, Charles paid premiums on the two family income insurance policies in the total amount of $ 1,278.72 and $ 1,322.41, respectively, pursuant to the terms of the agreement of August 9, 1940, and the divorce decree.  Charles did not deduct the total amount of the insurance premiums in either of his returns for 1947 and 1948.  Beulah did not include in her income for 1947 and 1948 the total amounts of the insurance premiums for 1947 and 1948.Issue 2: Payments for the Support of Beulah and for the Maintenance and Support of the Children.The agreement of August 9, 1940, which was incident to the decree of divorce, states that one of its purposes is to make provision "for the support of the Wife and for the maintenance, support, education and custody of the children." The agreement provides, inter alia, that it is to survive a divorce; that the wife is given custody of the children; that so long as the wife receives the payments provided by the agreement, she agrees to live with and properly maintain, care for, and educate the children; *182  that neither the wife nor either of the children shall have any right or power to anticipate any payment or assign or *617  encumber any rights or interests which either of them may have by reason of the agreement; that the wife accepts the provisions of the agreement in full satisfaction of all obligations of the husband for her support and maintenance, and for the support, education, and maintenance of the children; and that the agreement shall remain in effect only during the joint natural lives of both parties.Article 13 of the agreement provides, in part, as follows:THIRTEENTH: The Husband represents that because his "net income" (as hereinafter defined) for the year 1939 was in excess of $ 20,000, he hereby has agreed to make, only during the term of the joint natural lives of the Husband and Wife, and the Wife hereby agrees to accept, the provisions and payments set forth in this Article "Thirteenth" in lieu of and in full payment, satisfaction and discharge of all obligations of the Husband for the support, maintenance and education of the children, provided also, however, that the provisions of this Article "Thirteenth" shall not be effective after the remarriage*183  of the Wife, whether such remarriage be valid or not.  Upon such remarriage of the Wife, the provisions of this Article shall be superseded and replaced by the provisions of Article "Fourteenth" hereof.  So long as the Wife shall attempt in good faith to observe and fulfill the provisions of this agreement on her part to be performed, and during the natural life of the Husband, the Husband shall pay the sums as provided in this Article in full payment of any and all obligations of the Husband to support, maintain and care for the Wife and the children of the parties.Under Article 13 of the agreement, Charles agreed to pay Beulah "for the support and maintenance of the Wife and the support, maintenance and education of the children, the sum of $ 9,600 per annum, in equal monthly installments" for as long as his net income is at least $ 18,000 and not more than $ 24,000.  If the husband's net income exceeds $ 24,000 in any year, the payments to be made in the succeeding year are to be increased, proportionately, but are not to exceed $ 12,000.  If the husband's net income falls below $ 18,000 in any year, the payments to be made in the succeeding year are to be reduced, proportionately, *184  but not below $ 5,000.  In addition, the husband is to pay all necessary medical and dental expenses of the wife and children.  Also, if he decides to send the children to private schools, he shall pay all the expenses incident thereto in addition to all other payments provided in the agreement.  Under certain circumstances, the husband is to pay part of the cost, up to $ 1,000, of summer vacations for the children.Article 13 provides, also, as follows:(j) There shall be no revision in the payments herein provided for to be made to the Wife by reason of the death or majority of the children or either of them or by reason of the fact that they then no longer reside with the Wife, provided, however, that if, after any child attains the age of twenty-three years and the Husband shall so request in writing, the Wife shall make no further contribution to the support of said child, but may continue to furnish board and lodging to said child.  If the Wife, notwithstanding such written request by the Husband, continues to make payments to any such child for his support, the payments *618  herein provided to be made by the Husband to the Wife shall be reduced by 50%.Article 14 of the*185  agreement provides, in part, as follows:FOURTEENTH: * * *(a) The Husband shall pay to the Wife, for the support, maintenance and education of the children, the sum of $ 400 a month so long as such children shall continue to reside with said Wife.(b) In the event of the death or marriage of either child, or in the event either child no longer resides with the Wife, said payments shall be reduced by $ 200 per month for each such child.* * * *(d) The Husband shall continue to pay for the medical care of the children as set forth in subdivision (i) of Article "Thirteenth" but shall be under no obligation for the medical care and expenses of the Wife.(e) The provisions of subdivision (g) of Article "Thirteenth" shall continue in full force and effect.Article 16 of the agreement provides as follows:SIXTEENTH: (a) Promptly after the execution and delivery of this agreement, the Husband agrees to make a new will under which he will set up at least 80% of his entire net estate in trust, to the end that the Wife, until her death or remarriage, shall receive one-half the income of said trust or trusts (if the Husband has not remarried), or one-quarter of the income thereof (if*186  the Husband has remarried), and further provided that said income received by the Wife, together with the payments received by her from the insurance set forth in the annexed schedule shall not exceed, in the aggregate, a total of $ 10,000 per annum and the balance of said income (if the Husband has not remarried) or two-thirds of the balance of said income (if the Husband has remarried) shall be payable to all children of the Husband in equal shares.(b) In the event that the Wife shall die or remarry before the death of the Husband, she shall have no interest whatsoever in the estate of the Husband.(c) In the event that the Wife shall remarry after the death of the Husband, then the payments to the Wife provided for in this Article "Sixteenth" shall be reduced by fifty percentum.(d) Any portion of the income of said trust or trusts which may be released, by reason of paragraphs (b) or (c) of this Article becoming operative, shall be added to the income of all children of the Husband and shall be payable to them in equal shares.It was also provided in the agreement that if the husband 1 should be called on to pay, and should pay, any debt or obligation incurred by the wife "for*187  herself or the children," other than the obligations which the husband agreed to pay in the agreement, then it would be lawful for the husband to deduct such payments from future payments to the wife.Applying the standards set forth in the agreement for arriving at the amounts of annual payments by Charles, he was obligated to pay Beulah $ 12,000 in 1947, and $ 6,820.80 in 1948.*619  Under the terms of the agreement, Charles paid Beulah $ 10,500 in 1947, and $ 8,600 in 1948.  The payments totaling $ 8,600 in 1948 included payment of the unpaid balance of the payments due Beulah in 1947 in the amount of $ 1,500, and payment of the sum of $ 279.20 in excess of the amount Charles was obligated to pay Beulah for 1948.Neither Beulah nor Charles claimed dependency credits for their two children in their respective income *188  tax returns for 1947 and 1948.During 1947 and 1948, Charles paid additional amounts for medical expenses of Beulah and the two children, and for the charges of private schools which the two children attended.In his income tax returns for 1947 and 1948, Charles took deductions for the total amounts which he paid Beulah in each year.  Beulah, in her return for 1947, did not report in her income $ 4,800 of the payments she received from Charles in 1947.Of the amounts paid in 1947 and 1948 by Charles to Beulah, namely, $ 10,500 and $ 8,320.80, 50 per cent (or $ 6,000 in 1947 and $ 3,410.40 in 1948) represented a portion of the periodic payments to Beulah which the agreement fixed as a sum payable for the support of the two minor children.OPINION.Issue 1: Insurance Premiums.The respondent takes the position in these proceedings that the sums applied by Charles for the payment of insurance premiums during the taxable years were not received by Beulah, directly or constructively, within the meaning of section 22 (k) of the Internal Revenue Code, and that, therefore, deductions for such payments are not allowable to Charles under section 23 (u) of the Code.  He claimed deductions, *189  in his amended petitions, for the payments, as alimony payments, in the amount of $ 1,278.72 and $ 1,322.41 in 1947 and 1948.In taking the above position, the respondent now abandons his determination in his amended answer in the case of Beulah, that she is taxable for the insurance premiums paid in 1947.The questions to be decided are whether Beulah either became the sole and irrevocable beneficiary of the insurance policies, or was able to realize immediate cash benefits under the policies.  See Anita Quinby Stewart, 9 T. C. 195; Lemuel Alexander Carmichael, 14 T.C. 1356">14 T. C. 1356; Estate of Boies C. Hart, 11 T.C. 16">11 T. C. 16. If these questions cannot be answered affirmatively, and if it is held that Beulah's interest in the policies is only a contingent one with only a remote possibility of her obtaining economic benefit; and if the purpose of the provisions in the agreement of August 9, 1940, was to keep the policies alive so as to secure to Beulah support payments in the event she remains single *620  and survives Charles; then it must be held that the sums applied to pay premiums do not come within*190 section 22 (k). Meyer Blumenthal, 13 T. C. 28, affd.  183 F. 2d 15; Halsey W. Taylor, 16 T. C. 376; F. Ellsworth Baker, 17 T.C. 1610">17 T. C. 1610, 1615, affirmed on this issue (C. A. 2) 205 F. 2d 369; William J. Gardner, 14 T.C. 1445">14 T. C. 1445, 1447, affd.  191 F. 2d 857; Estate of Frank Charles Smith v. Commissioner, 208 F. 2d 349; Seligmann v. Commissioner, 207 F. 2d 489; Lilian Bond Smith, 21 T. C. 353; Raoul Walsh, 21 T.C. 1063">21 T. C. 1063.Petitioner Charles argues that, in effect, there was assignment of the policies to Beulah.  Also, he asserts that the rationale of the Seligmann and Lilian Bond Smith cases is based upon misconceptions which lead to incorrect conclusions.We cannot agree with petitioner Charles.  Upon consideration of the entire agreement of August 9, 1940, and all relevant facts in the record before us, it is held that Beulah was not the owner of any*191  of the insurance policies and that none of them ever have been assigned to her.  The policies were delivered to her only "for safekeeping."Beulah could not change the named beneficiaries of any of the policies.  Increase in the cash surrender value of the policies resulting from the payment of premiums was not available to her and provided no immediate economic benefit to her.  Whatever rights in the policies Beulah acquired were defeasible since they depended upon contingencies, and their value cannot be measured.  It is clear that the provisions of Article 12 of the agreement with respect to Beulah's remarriage during Charles' lifetime were designed to divest her interest in the policies.  The only conclusion is that Beulah's interest in the insurance is contingent. Only if she survives Charles without remarrying will Beulah, on the death of Charles, acquire a right to receive monthly income payments under the insurance policies. The children are the remainder beneficiaries. If Beulah remarries even after the death of Charles she will lose one-half of her insurance benefits.It is not certain that the payment of the insurance premiums will ever benefit Beulah; her remarriage*192  while Charles lives or her death would terminate her rights in the policies.It is held that the amount of the premium payments is not income to Beulah under section 22 (k) and the payments are not deductible by Charles under section 23 (u).  The cases cited by petitioner Charles are distinguishable.Issue 2: Payments for the Support of Beulah and for the Maintenance and Support of the Children.Section 22 (k) of the Code provides, in part, as follows:This subsection shall not apply to that part of any such periodic payment which the terms of the decree or written instrument fix, in terms of an amount of money *621  or a portion of the payment, as a sum which is payable for the support of minor children of such husband.The narrow question under this issue is whether the agreement of August 9, 1940, fixed as a sum which is payable for the support of the minor children of Charles some part of the periodic payments he is obligated to pay Beulah either in terms of an amount of money or in terms of a portion of the periodic payments.Charles contends that the agreement does not make provision for separability of periodic payments into either an amount or a portion as a sum*193  payable for the support of his minor children. He claims that, therefore, 100 per cent of the periodic payments which he is obligated to make is taxable to Beulah under section 22 (k) and is deductible from his income under section 23 (u).Beulah contends that the agreement fixes $ 4,800 per year, or $ 400 per month, as a part of the periodic payments as a sum which is payable for the support of the minor children. She claims that she is entitled to exclude from her income for 1947, $ 4,800 out of the $ 10,500 she received from Charles in that year.  In her case, the year 1948 is not before us, but if her theory were to be sustained it would follow that she will be entitled to exclude from her income for 1948, $ 4,800 out of the $ 8,320.80 she received in 1948, the amount which Charles paid in 1948 pursuant to the requirements of the agreement.  (It has been found that Charles paid, in 1948, $ 279.20 more than he was required to pay under the agreement.)It has been held that an "adequate consideration of the problem here presented requires a construction of the agreement as a whole, and the reading of each paragraph in the light of all the other paragraphs thereof." Robert W. Budd, 7 T. C. 413,*194  affirmed per curiam 177 F.2d 198">177 F. 2d 198. It has been noted, also, that "each case depends upon its own facts and specifically on the terms and provisions of the decree or written instrument." Warren Leslie, Jr., 10 T. C. 807, 810; Harold M. Fleming, 1308">14 T. C. 1308. See also Mandel v. Commissioner, 185 F.2d 50">185 F. 2d 50. Cf.  Dora H. Moitoret, 7 T.C. 640">7 T. C. 640.Upon considering the entire agreement of August 9, 1940, considering each article and each subsection with the other, we conclude that the agreement fixes a portion of the periodic payments, namely, 50 per cent, as a sum which is payable for the support of the two minor children, or 25 per cent, as a sum which is payable for the support of each minor child.  It is held, therefore, that in 1947, Charles cannot deduct under section 23 (u) $ 6,000 out of the $ 10,500 which he paid Beulah pursuant to the requirements of the agreement because Beulah, under section 22 (k), does not have to include $ 6,000 of the total sum she received in her taxable income; and that in 1948, Charles can deduct $ 4,910.40, *195  which is includible under section *622  22 (k) in Beulah's income, but he cannot deduct $ 3,410.40, one-half of the required 1948 payments, because Beulah will not have to include that amount in her income under section 22 (k).  Our reasons for arriving at this conclusion are as follows:The agreement taken as a whole clearly expresses the intention of providing for the support of both the children and Beulah, for a separability of the periodic payments into payments for the support of Beulah on the one hand, and for the support of the children on the other hand.  Article 7, for example, indicates such separability in providing that the children, as well as their mother, shall not have any right or power to anticipate any payments or to assign or encumber their interests in them.  We do not think that Article 7 becomes operative as to the children only in the event Beulah remarries, which would follow if we construed the agreement as not providing for separability of the payments during the period in which Beulah remains single.  This intention has to be considered, however, in the light of the method set forth for varying the amount of the annual sum to be paid to Beulah in accordance*196  with variations in the "net income," as defined, of Charles.  If his "net income" exceeds $ 24,000 in any year, the total sum payable to Beulah will increase above $ 9,600 a year and it will not be more than $ 12,000.  If his "net income" falls below $ 18,000 in any year, the total sum payable to Beulah will be less than a basic amount of $ 9,600, but not less than $ 5,000.  It is not in harmony or consistent with the provisions for fluctuations in the annual sum to be paid to Beulah for the support of herself and the two children to regard the agreement as fixing $ 4,800 as an amount of money which is the sum which is payable for the support of the minor children regardless of fluctuations in the annual amount she will receive.  Beulah's theory when it is worked out under possible variations each year in the total required amounts is inconsistent with and contrary to the ratio which was obviously intended, starting with the basic sum of $ 9,600.  Her theory reaches an extreme result when the minimum required amount of $ 5,000 is considered, for if the required total amount falls to the minimum of $ 5,000, and if $ 4,800 is the sum fixed by the agreement as a sum payable for the support*197  of the children, then only $ 200 is left to cover a year's support of Beulah.  On the other hand, if the agreement is seen as fixing "a portion" of the total required annual payment rather than as fixing "an amount" of the required annual payment as "a sum which is payable for the support of minor children" (following the wording of section 22 (k)) a harmonious and a reasonable procedure is found which is consistent with the system of making adjustments in the basic amount of $ 9,600 per annum for fluctuations in the "net income" of Charles.*623  The agreement clearly makes an annual payment of $ 9,600 per year, or $ 800 per month, the norm, or the basic amount of the total periodic payments for the support of Beulah and for the support of the two minor children. The sum of $ 9,600 per year, or $ 800 per month, is what Charles is required to pay if his "net income" is from $ 18,000 to $ 24,000 a year, and adjustments increasing or decreasing this basic sum depend upon whether his "net income" goes above $ 24,000 or below $ 18,000 in any year.  Next, in Article 14, it is provided that Charles will pay $ 400 per month for the support, maintenance, and education of the children*198  (or $ 200, if one should die).  It is observed that $ 400 is one-half of $ 800.  Reading Articles 13 and 14 together, it is apparent that there was an intention that of the basic amount, $ 800 per month -- $ 9,600 per year -- one-half was to be for the support of Beulah and one-fourth was to be for the support of each child (one-half for the support of two children).The annual amount to be paid by Charles may be different from year to year.  That is demonstrated in the years before us, for Charles was obligated under Article 13 to pay a total amount of $ 12,000 in 1947 and only $ 6,820.80 in 1948.  We think it was intended that the provisions of the agreement would be flexible so as to jibe with fluctuations in Charles' payments.  The facts in this proceeding show that fluctuations occurred also in the actual payments which Charles made of the amount which he was obligated to pay each year.  For example, although he was obligated to pay $ 12,000 in 1947, he paid only $ 10,500; and although he was obligated to pay $ 6,820.80 in 1948, he was in arrears for 1947 and he paid, in 1948, the arrearage of $ 1,500 in addition to what he was obligated to pay in 1948.Since the agreement clearly*199  and repeatedly mentions that payments shall be made for support of the children as well as support of their mother, and since the agreement makes very explicit provisions for varying the total amount to be paid for both purposes, it seems clear to us that it was intended that variations in the amounts to be paid for the support of the children, as distinguished from the support of their mother, should and could be worked out under the agreement.  In other words, one amount, the sum to be paid for the support of the children was not to be a rigid sum (such as $ 4,800 per year for as long as Beulah did not remarry) while the other amount, the sum to be paid for the support of Beulah, was to be a variable sum.  The necessary flexibility is provided by using a percentage, 50 per cent or 25 per cent, as the measure of the portion of the periodic payments which is the sum to be used for the support of two minor children or a minor child.That 50 per cent of the periodic payments is for the support of the children is also demonstrated by subsection (j) of Article 13 which *624  is quoted in our Findings of Fact.  If the eldest son attains the age of 23 years and if Charles requests that*200  no further contribution shall be made by Beulah for the support of that child out of the periodic payments she receives from Charles, and if Beulah continues to make payments to such child for his support contrary to Charles' request, then Charles has the right to reduce the periodic payments by 50 per cent.  This provision must refer to the portion of periodic payments which is for the support of the children.  Charles did not exonerate himself, under the agreement, from an obligation to support his sons after each became 21 years of age, but subsection (j) of Article 13 provides a means whereby Charles may, if he wishes, terminate the provision for their support upon their reaching 21 years of age.  The son Charles was born in 1928, and Donald was born in 1930.  When Charles became 23 years of age, in 1951, Donald was 21 years of age.  It is apparent that the terms of subsection (j) are such as to enable the father to reduce the periodic payments to Beulah when his eldest son reaches the age of 23 and the youngest reaches the age of 21, thereby terminating payments under the agreement for the support of the children.All of the above is, in our opinion, what is involved here in *201  considering the agreement as a whole, as we have previously said we must do.  Robert W. Budd, supra. We think such consideration of the agreement must lead to the conclusion, the conclusion which we reach, that the agreement fixed "a portion of the payment", namely 50 per cent, "as a sum which is payable for the support of minor children."Petitioner Charles argues that no consideration should be given at all in these proceedings to the provisions of Article 14 because it relates to such time as Beulah remarries, i. e., Article 14 is to take the place of Article 13 if Beulah remarries. To this argument we reply that the same argument was made in the Leslie case, supra, but we did not regard it as significant.  We do not think it makes any difference here that Article 14 is the place where the sum of $ 400 per month for the support of two children is mentioned.  We must consider the agreement as a whole, and we regard Article 14 as a very enlightening provision to which we may not close our eyes.We have considered the cases cited by petitioner Charles.  He relies chiefly on the Moitoret case, supra.  He refers also to several unreported*202  Memorandum decisions of this Court.  The cases relied upon are distinguishable on their facts.We have had to consider another question of fact, namely, whether a payment of $ 500 which Charles made to Beulah in January of 1947 was a part of the alimony payments for 1947, or was a reimbursement to Beulah for the last quarter of her income tax for 1946, as she contends.  Charles was obligated to make payments aggregating $ 12,000 in 1947.  His total payments amounted to $ 10,500.  The evidence *625  about the nature or purpose of a payment of $ 500 is conflicting.  Charles denies that the $ 500 in question was to reimburse Beulah for taxes.  Beulah, in our opinion, has failed to prove that the disputed payment was to reimburse her for a part of her tax payments for 1946 and was not part of the periodic alimony payments.  Therefore, it has been found that Charles paid Beulah $ 10,500 in 1947, rather than $ 10,000, in partial payment of his obligation to pay her $ 12,000 in that year.The respondent, by amended answer, determined that Beulah is taxable for $ 490 in 1947 for an alleged alimony payment.  However, Charles has conceded that this sum was not part of the alimony payments*203  and that he cannot deduct it under section 23 (u).  It is held that $ 490 was not income to Beulah in 1947 under section 22 (k).Decisions will be entered under Rule 50.  Footnotes*. See also supplemental report, 23 T. C. 630.↩1. In the agreement of August 9, 1940, the terms "husband" and "wife" are used.  In this proceeding it is understood that those terms mean Charles, the former husband, and Beulah, the former wife.↩