T.C. Memo. 1998-9
UNITED STATES TAX COURT
ANTONIO T. CROTEAU, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 814-96. Filed January 12, 1998.
Antonio T. Croteau, pro se.
Joan S. Dennett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI, Judge: Respondent determined a deficiency of
$9,648 in, and an accuracy-related penalty of $1,930 on,
petitioner's Federal income tax for 1993.
The issues for decision are:
(1) Are certain payments that petitioner Antonio T. Croteau
(Mr. Croteau) made during 1993 to or on behalf of Jeanne Anne
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Marie Croteau (Ms. Croteau) deductible for that year as alimony
or separate maintenance payments under section 215(a)?1 We hold
that they are not.
(2) Is petitioner liable for 1993 for the accuracy-related
penalty under section 6662(a)? We hold that he is.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner resided in Whitefish, Montana, at the time the
petition was filed.
Petitioner married Ms. Croteau in May 1981. They separated
in November 1992.
On January 13, 1993, petitioner and Ms. Croteau executed a
marital settlement agreement (agreement) which petitioner had
prepared. In preparing the agreement, petitioner used as a model
a marital settlement agreement that had been entered into by his
son and the former wife of his son.
On January 15, 1993, Mr. Croteau filed a petition in the
Superior Court of California, county of Ventura, for dissolution
of his marriage to Ms. Croteau (petition for dissolution of
marriage). The petition for dissolution of marriage was a
preprinted form on which Mr. Croteau provided certain information
requested by the form. That preprinted form stated, inter alia:
1
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the year at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
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"Petitioner requests confirmation as separate assets and obliga-
tions the items listed". Mr. Croteau did not list any such items
in the petition for dissolution of marriage.
The agreement was attached to and filed with the petition
for dissolution of marriage. The agreement provided in pertinent
part as follows:
I, Antonio Theodore Croteau husband and I, Jeanne Anne
Marie Croteau wife agree as follows:
I. GENERALLY: We are now husband and wife. * * *
* * * * * * *
C. We now intend, by this agreement, to make a
final and complete settlement of all our rights and
obligations concerning division of property, and spous-
al support.
* * * * * * *
III. SUPPORT PAYMENTS TO SPOUSE: In consideration of
the other terms of this agreement, and whereas both
spouses are fully self-supporting, both parties waive
all right or claim which they may now have to receive
support or maintenance from the other. No court shall
have jurisdiction to award spousal support at any time
regardless of any circumstances that may arise.
IV. DIVISION OF COMMUNITY PROPERTY AND DEBTS: The
parties warrant and declare under penalty of perjury
that the assets and liabilities divided in this agree-
ment constitute all their community and quasi-community
assets and liabilities. In the event that the division
is unequal, the parties knowingly and intelligently
waive an equal distribution of the community property.
A. Husband is awarded and assigned the following
assets as his share of the community property:
* * * * * * *
B. Wife is awarded and assigned the following
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assets as her share of the community property:
1. 1990 Chevrolet Pick Up, license no.
3Z23039.
2. 1986 Country Camper motorhome, license
no. 2EAE391.
3. 1986 Suzuki Samurai, license no.
1SDJ835.
4. U-Save Trailer, license no. 1AH6844.
5. Log cabin on Highway 2 at McGregor Lake,
Montana.
6. Household possessions including jewelry
collection.
7. Husband shall forthwith remove his name
from registration and registration shall
be solely in wife's name.
C. Debts:
1. Husband Antonio Theodore Croteau agrees
to deliver the aforementioned vehicles
free and clear of any liens, he also
shall make payments on the McGregor Lake
cabin until it is fully paid for.
2. Husband agrees to maintain insurance on
the aforementioned vehicles until Janu-
ary 1st, 1994.
* * * * * * *
V. EQUALIZATION PAYMENT:
In the interest of fairness, and in consideration of the
manner in which the property was divided, husband shall pay
to wife the following sums as a division of the community
property. Husband agrees to pay $1000.00 per month begin-
ning on April 1st, 1993 and ending April lst, 1995. He also
shall pay wife $15,000.00 for moving expenses also due April
1st, 1993. Husband also agrees to pay health insurance for
wife and any auto repairs or maintenance on the aforemen-
tioned vehicles or other necessities from January 1st, 1993
through December 31, 1993, not to exceed $10,000.00 total.
VI. RESERVATION OF JURISDICTION:
The parties agree that the court shall have jurisdic-
tion to make whatever orders may be necessary or desir-
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able to carry out this agreement and to divide equally
between the parties any community assets or liabilities
omitted from division under this agreement.
VII. ADVICE OF COUNSEL:
The parties recognize that the termination of the
marriage, division of marital property, and payment
agreement will be determined by this instrument. We
recognize that we each have a right to seek advice from
independent counsel of our own choosing and that we
knowingly and with due regard for the importance of
same have elected to proceed with this agreement.
* * * * * * *
IX. PRESENTATION TO COURT:
This agreement shall be presented to the court in any
divorce proceeding between the parties, it shall be
incorporated in the Judgement therein, the parties
shall be ordered to comply with all its provisions, and
all warranties and remedies provided in this agreement
shall be preserved.
X. DISCLOSURES:
Each party has made a full and honest disclosure to the
other of all current finances and assets, and each
enters into this agreement in reliance thereon. Each
warrants to the other and declares under penalty of
perjury that the assets and liabilities divided in this
agreement constitute all of their community assets and
liabilities.
XI. BINDING EFFECT:
This agreement, and each provision thereof, is ex-
pressly made binding upon heirs, assigns, executors,
administrators, representatives, and successors in
interest of each party.
During 1993, petitioner made payments by check to or on
behalf of Ms. Croteau that totaled $33,368. Of that total
amount, $10,642 was paid pursuant to that portion of the agree-
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ment entitled "DIVISION OF COMMUNITY PROPERTY AND DEBTS" and
approximately $22,250 was paid pursuant to that portion of the
agreement entitled "EQUALIZATION PAYMENT".
Petitioner filed a U.S. Individual Income Tax Return (re-
turn) for 1993, in which he claimed a deduction for alimony in
the amount of $34,368.
In the notice of deficiency (notice) issued to petitioner
with respect to his taxable year 1993, respondent determined that
petitioner is not entitled to the alimony deduction that he
claimed in his 1993 return and that he is liable for the
accuracy-related penalty under section 6662(a).2
OPINION
Petitioner has the burden of proving error in respondent's
determinations. Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933).
Claimed Alimony Deduction
Section 215(a) allows an individual to deduct alimony or
separate maintenance payments made by such individual during his
or her taxable year. Section 215(b) defines the term "alimony or
separate maintenance payment" to mean any alimony or separate
maintenance payment as defined in section 71(b) that is
2
Respondent's disallowance of the alimony deduction claimed by
petitioner in his 1993 return resulted in an increase in peti-
tioner's adjusted gross income. Consequently, respondent also
made adjustments in the notice totaling $688 to the itemized
deductions that petitioner claimed in his 1993 return.
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includible in the gross income of the recipient under section 71.
Neither section 215 nor section 71 applies if the spouses file a
joint return. Sec. 71(e).
Section 71(b)(1) defines the term "alimony or separate main-
tenance payment" to mean any cash payment if--
(A) such payment is received by (or on behalf of)
a spouse under a divorce or separation instrument,
(B) the divorce or separation instrument does not
designate such payment as a payment 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 sepa-
rate 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.
Petitioner contends that during 1993 he made payments
totaling $33,8923 to or on behalf of Ms. Croteau, which consti-
tute alimony or separate maintenance payments as defined in
section 215(b). All but $1,000 of the total payments claimed by
petitioner were made by checks that are part of the record in
this case. Petitioner contends that he made the remaining $1,000
payment in cash. Except for his uncorroborated, self-serving
3
Although petitioner claimed a total alimony deduction of
$34,368 in his 1993 return, he conceded at trial that he is not
entitled to $476 of that amount.
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testimony on which we are unwilling to rely, there is no evidence
in the record to support petitioner's claim as to that $1,000
payment. Consequently, in the event that the Court were to
decide that petitioner is entitled to deduct under section 215(a)
all or a portion of the payments that he made to or on behalf of
Ms. Croteau during 1993, the maximum amount of such a deduction
would be $32,892.
We shall now address whether petitioner has established that
his liability to make the payments at issue terminated upon the
death of Ms. Croteau because resolution of that question will be
dispositive of the issue presented under section 215(a). The
agreement is silent as to whether petitioner was liable to make
the payments at issue after the death of Ms. Croteau. Conse-
quently, we must look to the effect of State law on that ques-
tion. See Hoover v. Commissioner, 102 F.3d 842, 846-847 (6th
Cir. 1996), affg. T.C. Memo. 1995-183; Sampson v. Commissioner,
81 T.C. 614, 618 (1983), affd. without published opinion 829 F.2d
39 (6th Cir. 1987).
Cal. Civ. Code sec. 4801(b) (West 1983), repealed by 1992
Cal. Stat. 162, sec. 3 (effective Jan. 1, 1994), provides:
(b) Effect of Death or Remarriage. Except as
otherwise agreed by the parties in writing, the obliga-
tion of any party under any order or judgment for the
support and maintenance of the other party shall termi-
nate upon the death of either party or the remarriage
of the other party.
If the payments at issue were for the support and maintenance of
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Ms. Croteau within the meaning of Cal. Civ. Code sec. 4801(b),
they would terminate at the death of Ms. Croteau, Cal. Civ. Code
sec. 4801(b), and would comply with the definitional requirement
for alimony or separate maintenance payments that is set forth in
section 71(b)(1)(D). If the payments at issue were for the
division of community property, they would not terminate at the
death of Ms. Croteau, cf. Lipka v. Lipka, 386 P.2d 671, 674 (Cal.
1963); Cal. Civ. Code sec. 4801(b), and would not comply with
that definitional requirement.
We find the terms of the agreement to be unequivocal in
providing (1) that petitioner and Ms. Croteau waived all right or
claim that they may have had to receive support or maintenance
from the other4 and (2) that all payments which petitioner was to
make to or on behalf of Ms. Croteau were for the division of
their community property.5 On the instant record, we find that
4
The agreement stated in pertinent part:
SUPPORT PAYMENTS TO SPOUSE. In consideration of the other
terms of this agreement, and whereas both spouses are fully
self-supporting, both parties waive all right or claim
which they may now have to receive support or maintenance
from the other. No court shall have jurisdiction to award
spousal support at any time regardless of any circumstances
that may arise.
5
Indeed, petitioner conceded at trial that the payments at
issue were made either under the portion of the agreement enti-
tled "DIVISION OF COMMUNITY PROPERTY AND DEBTS" or the portion of
the agreement entitled "EQUALIZATION PAYMENT". The portion of
the agreement entitled "DIVISION OF COMMUNITY PROPERTY AND DEBTS"
provided in pertinent part:
(continued...)
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the payments at issue were not for the support and maintenance of
Ms. Croteau within the meaning of Cal. Civ. Code sec. 4801(b),
but were for the division of the community property of petitioner
and Ms. Croteau.
Petitioner attempts to disavow the agreement. He claims
that he and Ms. Croteau intended that the payments at issue were
to be for the support of Ms. Croteau and that they did not intend
that such payments were to be for the division of their community
property. On the record before us, we shall not allow petitioner
to disavow the agreement into which he and Ms. Croteau entered.6
5
(...continued)
The parties warrant and declare under penalty of perjury
that the assets and liabilities divided in this agreement
constitute all their community and quasi-community assets
and liabilities. In the event that the division is un-
equal, the parties knowingly and intelligently waive an
equal distribution of the community property.
The portion of the agreement entitled "EQUALIZATION PAYMENT"
stated:
In the interest of fairness, and in consideration of the
manner in which the property was divided, husband shall pay
to wife the following sums as a division of the community
property. Husband agrees to pay $1000.00 per month begin-
ning on April 1st, 1993 and ending on April 1st, 1995. He
also shall pay wife $15,000.00 for moving expenses also due
April 1st, 1993. Husband also agrees to pay health insur-
ance for wife and any auto repairs or maintenance on the
aforementioned vehicles or other necessities from January
1st, 1993 through December 31, 1993, not to exceed
$10,000.00 total.
6
Under California law, the agreement is a contract which is
governed by the same principles applicable to contracts gener-
ally. See In re Marriage of Hasso, 280 Cal. Rptr. 919, 922 (Cal.
(continued...)
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See Palo Alto Town & Country Village, Inc. v. Commissioner, 565
F.2d 1388, 1390 (9th Cir. 1977), remanding T.C. Memo. 1973-223;
Baxter v. Commissioner, 433 F.2d 757, 759 (9th Cir. 1970), affg.
T.C. Memo. 1969-87; Meredith Corp. v. Commissioner, 102 T.C. 406,
438 (1994).
Based on our examination of the entire record before us, we
find (1)(a) that petitioner has failed to persuade us that the
payments at issue were for the support and maintenance of Ms.
Croteau within the meaning of Cal. Civ. Code sec. 4801(b) and
(b) that, consequently, Cal. Civ. Code sec. 4801(b), which
requires the obligation of a party under an order or judgment for
the support and maintenance of the other party to terminate upon
the death of either party, does not apply to those payments and
(2) that petitioner has failed to establish that the payments at
issue satisfy the definitional requirement for alimony or sepa-
rate maintenance payments that is set forth in section
71(b)(1)(D). Accordingly, petitioner has failed to show that
6
(...continued)
App. 1st 1991). Under California contract law, extrinsic evi-
dence concerning the facts and circumstances surrounding the
execution of a property settlement agreement is not admissible to
vary or alter that agreement if the terms of the contract are
susceptible of only one reasonable interpretation. See Cal. Civ.
Proc. Code sec. 1856 (West 1983); In re Marriage of Iberti, 64
Cal. Rptr. 2d 766, 768-769 (Cal. App. 2d 1997); see also Cal.
Civ. Code sec. 1638 (West 1985). We conclude that the terms of
the agreement are susceptible to only one reasonable interpreta-
tion. Consequently, we shall disregard the extrinsic evidence
offered by petitioner concerning the alleged terms of the agree-
ment, which conflict with the actual terms of the agreement.
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those payments are alimony or separate maintenance payments
within the meaning of section 215(b). Therefore, respondent's
determination disallowing the alimony deduction claimed by
petitioner for 1993 is sustained.
Section 6662(a)
Section 6662(a) imposes an addition to tax equal to 20
percent of the underpayment of tax attributable to, inter alia,
negligence or disregard of rules or regulations under section
6662(b)(1). For purposes of section 6662(a), the term "negli-
gence" includes any failure to make a reasonable attempt to
comply with the Internal Revenue Code, and "disregard" includes
any careless, reckless, or intentional disregard. Sec. 6662(c).
Negligence has also been defined as a lack of due care or failure
to do what a reasonable person would do under the circumstances.
Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992),
affg. T.C. Memo. 1991-179; Antonides v. Commissioner, 91 T.C.
686, 699 (1988), affd. 893 F.2d 656 (4th Cir. 1990).
The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment if it is shown that there
was reasonable cause for, and that the taxpayer acted in good
faith with respect to, such portion. Sec. 6664(c)(1). The
determination of whether a taxpayer acted with reasonable cause
and in good faith depends upon the pertinent facts and circum-
stances, including the taxpayer's efforts to assess his or her
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proper tax liability and the knowledge and experience of the
taxpayer. Sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioner makes no argument concerning respondent's deter-
mination under section 6662(a) except for his claim, which we
have rejected, that he and Ms. Croteau did not intend that the
terms of the agreement control the payments at issue. Based on
our examination of the entire record before us, we find that
petitioner has failed to show that he acted with reasonable cause
and in good faith, or that he otherwise exercised due care or
made a reasonable attempt to comply with the Internal Revenue
Code, when he claimed the alimony deduction at issue. Accord-
ingly, we sustain respondent's determination imposing the
accuracy-related penalty under section 6662(a) for 1993.
To reflect the foregoing,
Decision will be entered
for respondent.