T.C. Memo. 1998-53
UNITED STATES TAX COURT
DEWEY AND CARLENA K. HAMMOND, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5822-97. Filed February 10, 1998.
R filed a motion, and Ps filed a cross-motion, for
partial summary judgment on the issue of whether
certain payments made by P-H to a former spouse during
taxable years 1993, 1994, and 1995 constitute
deductible alimony pursuant to sec. 215(a), I.R.C., or
are instead nondeductible child support within the
meaning of sec. 71(c), I.R.C. Held: R's motion for
partial summary judgment granted, and Ps' cross-motion
for partial summary judgment denied, Rule 121(b), Tax
Court Rules of Practice and Procedure; the payments at
issue are treated as fixed for child support and are
therefore nondeductible to Ps. Sec. 71(c)(2), I.R.C.
Joseph M. Seigler, Jr., for petitioners.
Clinton M. Fried, for respondent.
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MEMORANDUM OPINION
NIMS, Judge: This matter is before the Court on
respondent's motion, and petitioners' cross-motion, for partial
summary judgment filed pursuant to Rule 121 on August 28, 1997,
and September 29, 1997, respectively.
Unless otherwise indicated, all section references are to
sections of the Internal Revenue Code in effect for the years at
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
Respondent determined the following deficiencies and
accuracy-related penalties with respect to the Federal income tax
of petitioners, Dewey and Carlena K. Hammond, for the taxable
years 1993, 1994, and 1995:
Penalty
Year Deficiency Sec. 6662(a)
1993 $9,888 $1,978
1994 9,028 1,806
1995 7,339 1,468
As a result of concessions made subsequent to the motion and
cross-motion for partial summary judgment, the parties now agree
that this case may be resolved in its entirety via summary
judgment. The sole remaining issue for decision is whether
certain monthly payments of $2,000 made by Dewey Hammond (herein
Dewey or petitioner) to his former spouse, Rebecca Hammond
(Rebecca), during each of the years in issue pursuant to a
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divorce decree are deductible alimony payments or, in the
alternative, nondeductible child support payments.
Petitioners resided in Rome, Georgia, at the time they filed
their amended petition.
Background
The background facts related below are derived from the
pleadings in this case, affidavits filed by both respondent's
counsel and petitioner, the exhibits attached thereto, and the
uncontroverted written representations of the parties.
Dewey and Rebecca had one child, Justin Joel Hammond
(Justin), who was born in July 1985. In September 1988, Rebecca
brought an action for divorce in the Superior Court of Gordon
County, Georgia (Superior Court); a jury verdict was subsequently
rendered. A "Final Judgment and Decree" of divorce (Judgment)
incorporating the jury verdict was entered by the Superior Court
on October 31, 1988.
Paragraph 1 of the Judgment awarded Rebecca semimonthly
child support payments for Justin of $575, or $1,150 per month,
until Justin attained 18 years of age, died, married, or joined
the military.
Paragraph 2 of the Judgment provides as follows:
ALIMONY
Upon said jury verdict, IT IS ORDERED, DECREED and
ADJUDGED that the defendant DEWEY HAMMOND, III, pay to
REBECCA HAMMOND the sum of $2,000.00 per month as
alimony commencing October 1, 1988, and ending on
JUSTIN JOEL HAMMOND'S eighteenth birthday, or at the
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time of remarriage of REBECCA HAMMOND, whichever comes
first. [Emphasis added.]
The payments designated for child support in paragraph 1 of
the Judgment were modified pursuant to an August 13, 1993, order
of the Superior Court of Floyd County, Georgia. The semimonthly
payments were increased to $1,006.25, or $2,012.50 per month.
At all times during the years in dispute, petitioner made
alimony and child support payments in accordance with the terms
of the Judgment by separate check. Each check was clearly marked
either "alimony" or "child support" on its bottom left corner.
Petitioners jointly filed Forms 1040, U.S. Individual Income
Tax Return, for taxable years 1993, 1994, and 1995. Petitioners
deducted as alimony on each return the total yearly payments of
$24,000 made to Rebecca pursuant to the terms of paragraph 2 of
the Judgment. Respondent disallowed these deductions in their
entirety.
In addition to the foregoing and the adjustments conceded by
petitioners, respondent determined that petitioners were liable
for accuracy-related penalties for negligence pursuant to section
6662(a) for those years. During a telephone conference call
between the parties and the Court held on October 10, 1997,
respondent conceded that petitioners are not liable for the
section 6662(a) accuracy-related penalties for the years in
dispute.
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Discussion
A motion for summary judgment may be granted if the
pleadings and other materials demonstrate that no genuine issue
of material fact exists and the decision can be rendered as a
matter of law. Rule 121(b). As noted above, the parties agree
that this case may be resolved by summary judgment, and we are
satisfied that no genuine issue exists as to any of the material
facts. We proceed accordingly.
Section 215(a) allows as a deduction to the payor an amount
equal to the alimony or separate maintenance payments made during
the payor's taxable year that are includable in the recipient's
gross income under section 71(a). Whether a payment constitutes
alimony or separate maintenance within the meaning of sections
71(a) and 215(a) is determined by reference to section 71(b).
Section 71(b) defines an alimony or separate maintenance
payment as follows:
(b) Alimony or Separate Maintenance Payments
Defined.--For purposes of this section--
(1) In general.--The term "alimony or
separate maintenance payment" means any payment in
cash 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
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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.
Section 71(c), relating to payments to support children,
provides in relevant part:
(c) Payments to Support Children.--
(1) In general.--Subsection (a) shall not
apply to that part of any payment which the terms
of the divorce or separation instrument fix (in
terms of an amount of money or a part of the
payment) as a sum which is payable for the support
of children of the payor spouse.
(2) Treatment of certain reductions related
to contingencies involving child.--For purposes of
paragraph (1), if any amount specified in the
instrument will be reduced--
(A) on the happening of a contingency
specified in the instrument relating to a
child (such as attaining a specified age,
marrying, dying, leaving school, or a similar
contingency), or
(B) at a time which can clearly be
associated with a contingency of a kind
specified in subparagraph (A),
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an amount equal to the amount of such reduction
will be treated as an amount fixed as payable for
the support of children of the payor spouse.
Thus, under section 71(c), if under the terms of the divorce
or separation instrument any amount specified in the instrument
will be reduced on the happening of a contingency relating to a
child, including the child's attaining a specified age, an amount
equal to the amount of the reduction will be treated as child
support and will not qualify as alimony.
In the case before us, we have no difficulty in concluding
that the Judgment's termination of the $2,000 monthly payments to
Rebecca coinciding with Justin's eighteenth birthday is precisely
the kind of contingency contemplated by the statute, which
renders payments of the kind under scrutiny ineligible for
treatment as alimony. We reached the same conclusion in Fosberg
v. Commissioner, T.C. Memo. 1992-713, involving an almost
identical "contingency". In addition, if further support for
this conclusion were needed, section 1.71-1T(c), Q&A-16,
Temporary Income Tax Regs., 49 Fed. Reg. 34456 (Aug. 31, 1984),
provides, among other things, that
A payment will be treated as fixed as payable for the
support of a child of the payor spouse if the payment is
reduced (a) on the happening of a contingency relating to a
child of the payor, or (b) at a time which can clearly be
associated with such a contingency. A payment may be
treated as fixed as payable for the support of a child of
the payor spouse even if other separate payments
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specifically are designated as payable for the support of a
child of the payor spouse.
In opposition to respondent's motion, and in support of
their cross-motion, petitioners argue that the contested payments
are alimony rather than child support inasmuch as petitioner was
also required to make separately allocated, fixed payments for
child support under the terms of paragraph 1 of the Judgment
during the years at issue. Petitioners maintain that section
71(c)(2) should not operate to "convert alimony payments to child
support when child support payments are already fixed in
accordance with section 71(c)(1)." Petitioners cite no authority
in support of this proposition, and we have found none.
We are satisfied that the contested payments in 1993, 1994,
and 1995 constitute nondeductible child support for Federal tax
purposes, notwithstanding the fact that the Judgment labeled such
payments "alimony" and the fact that the payments in question
appear to have met all of the definitional requirements of
section 71(b). See Jacklin v. Commissioner, 79 T.C. 340, 351-352
(1982); Heller v. Commissioner, T.C. Memo. 1994-423 ("As long as
the definitional requirements of section 71(b)(1) are met, the
parties' allocation of amounts are generally respected. Section
71(c)(2) represents one exception to this rule.") (fn. ref.
omitted; emphasis added).
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Finally, petitioners assert that it would be "inequitable"
to treat the payments in dispute as child support. Regrettably
for petitioners, this Court is not a court of equity and does not
possess general equitable powers. Stovall v. Commissioner, 101
T.C. 140, 149-150 (1993) (citing Commissioner v. McCoy, 484 U.S.
3 (1987)). Even a District Court, with equitable powers, cannot
disregard statutory terms. See INS v. Pangilinan, 486 U.S. 875,
883 (1988). Therefore, petitioners' argument on this score is
unavailing.
We have considered the remaining arguments of petitioners
and, to the extent we have not addressed them, find them to be
unconvincing. We hold that petitioners are not entitled to
alimony deductions in the amount of $24,000 claimed on each of
their returns for taxable years 1993, 1994, and 1995.
To reflect the foregoing and concessions,
An appropriate order
granting respondent's motion
for partial summary judgment and
denying petitioners' cross-motion
for partial summary judgment will
be issued, and decision will be
entered under Rule 155.