Court Opinion

ID: 4477221
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:25.662232+00
Date Added: 2024-06-11T14:53:27.528184
License: Public Domain

OPINION. Tietjens, Judge: Pointing to the words of sections 22 (k) and 23 (u) which provide for a deduction by the husband if he makes payments to his divorced wife— in discharge of * * * a legal obligation which, because of the marital or family relationship, is imposed upon or incurred by such husband * * * under a written instrument incident to such divorce or separation, the Commissioner contends that two of the conditions precedent to the deductions here claimed are lacking, i. e., (1) that there was no legal obligation on the husband and (2) that the written agreement was not incident to divorce. With reference to the first argument we think the husband was under a legal obligation to make the payments. The oral agreement was made before the divorce and so at a time when Maurice was still under an obligation pursuant to Illinois law to provide for his wife’s support and maintenance. Ill. Eev. Stat. (Smith-Hurd, 1953) ch. 68, sec. 52. It is not questioned that such was the purpose of the arrangement. The Illinois law is settled that agreements of this kind are valid and survive divorce even though the grounds for the decree are the faults of the wife. In re Moser, 145 F. 2d 523 (C. A. 7) and cases therein cited. The troublesome problem is whether the agreement pursuant to which the payments were made is a “written instrument incident” to divorce. On this point the Commissioner stresses that the divorce occurred in April' 1940 and that the written agreement was not made until April 1945 and from this would have us conclude that it was not “incident” to the divorce within the meaning of the statute. Had the agreement between Maurice and Ethyl been reduced to writing in the first place, or had the writing of April 5, 1945, been an amendment of a prior written agreement incident to divorce, even though the amendment was executed years after the divorce, we would have no difficulty, for the courts have decided that payments made by the husband under such agreements are either deductible by him or taxable to the wife. Newton v. Pedrick, 212 F. 2d 357 (C. A. 2) (an amenda-tory agreement some 6 years post-divorce providing for payments “in addition” to amounts already payable); Rowena S. Barnum, 19 T. C. 401 (an agreement 19 years after divorce settling disputes in respect of previous agreements); Antoinette L. Holahan, 21 T. C. 451 (a change in an agreement originally incident to divorce made 20 years thereafter). The case.involving a factual situation nearest to that before us is Thomas E. Hogg, 13 T. C. 361, cited by both parties. There a divorce was granted on May 15, 1939. The decree made no reference to alimony. On May 17,1939, the parties entered into a written agreement with respect to alimony pursuant to a prior oral agreement. This Court held that the payments under the written agreement were deductible, saying that the— payments were made pursuant to an enforceable agreement; that the agreement’s terms were fully understood before the wife petitioned for divorce, and were incorporated in written contracts or deeds immediately after the decree was granted. The Commissioner lays hold on the word “immediately” as indicating that the agreement must be near in point of time to the decree in order for it to fulfill the requirements of the statute. While the short lapse of time perhaps made the Hogg case easier of decision we do not think it was the controlling consideration. We think what was controlling was the existence of an enforceable obligation with reference to alimony at the time of the divorce which was later reduced to writing. And that is precisely the situation before us. Cf. Frank J. DuBane, 10 T. C. 992, where, though holding for other reasons that the payments were not deductible, it was indicated that an oral agreement entered into prior to divorce which was later reduced to writing could be “incident” to divorce. The Commissioner also cites Benjamin B. Cox, 10 T. C. 955, affd. 176 F. 2d 226 (C. A. 3), as militating against a holding here that a written agreement entered into some years after a divorce can be “incident” to the divorce. But the Cox case is easily distinguishable from this cáse because there there was no subsisting oral agreement at the time of divorce which was later put in written form. We hold that the payments here in question were made under a written agreement incident to divorce and were therefore deductible. Maurice was under a legal obligation to support his wife at the time the oral agreement referred to in our findings was made, that agreement was enforceable by Ethyl at the time of and after the divorce, and all the written agreement accomplished, was to reduce the obligation orally undertaken to writing. There is no question in our mind but that the oral agreement was incident to divorce and we think that in the circumstances the written agreement must also be held to be incident to divorce. In passing we point out that the oral agreement was made and the divorce was granted prior to enactment of sections 22 (k) and 23 (u) and that the agreement was reduced to writing after their enactment. There is no indication in the record of any connection between the Code changes and the fact that the agreement was thereafter put in writing. No deductions are claimed for payments made under the oral agreement. We also quote as apposite the statement of the Court of Appeals for the Second Circuit.in Lerner v. Commissioner, 195 F. 2d 296, 298, reversing 15 T. C. 379: The term “written instrument incident to such divorce” was designed, we think, only to insure adequate proof of the existence of the obligation when divorce has occurred, and not to deny relief to the husband when merely legal formalities have not been rendered their full due. On the record before us we have no question but that the existence of the obligation when the divorce occurred has been fully proved. Eeviewed by the Court. Decisions will be entered for the 'petitioners.