T.C. Summary Opinion 2001-70
UNITED STATES TAX COURT
CHESTER W. BONAR, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5240-00S. Filed May 15, 2001.
Chester W. Bonar, pro se.
Kathleen K. Raup, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. Unless otherwise
indicated, subsequent section references are to the Internal
Revenue Code in effect for the years in issue. The decision to
be entered is not reviewable by any other court, and this opinion
should not be cited as authority.
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Respondent determined deficiencies in petitioner’s Federal
income taxes of $2,352 for each of the 1995 and 1996 taxable
years. The issue for decision is whether payments made by
petitioner to his ex-wife in 1995 and 1996 are deductible as
alimony under section 215(a).
Background
The stipulation of facts and the accompanying exhibits are
incorporated herein by reference. Petitioner resided in
Philadelphia, Pennsylvania, at the time his petition was filed
with the Court.
Petitioner was legally divorced from his ex-wife in 1993.
Petitioner and his ex-wife entered into a Stipulation and
Agreement (Agreement) dated June 25, 1993, providing for support
for petitioner’s ex-wife and children. With respect to child
support, the Agreement provides in pertinent part:
Husband shall pay to Wife as and for child support
the amount of TWO HUNDRED SIXTY ($260) Dollars per
week, payable on a weekly basis, subject to termination
upon the death of the payor or infant children; upon
each of the infant children attaining the age of
eighteen (18), graduation from high school, marriage or
other emancipation, whichever of said terminating
contingencies shall first occur. If the child is a
full time high school student, is not self-supporting
and is living in the home of the parent receiving child
support, the Husband shall continue to pay said child
support until the child reaches the age of nineteen
(19) or graduates from high school, whichever first
occurs.
A separate provision addressing spousal support provides:
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SPOUSAL SUPPORT/RETIREMENT: Husband shall pay to
Wife as and for spousal support, alimony and
maintenance, the periodic sum of SEVEN HUNDRED ($700)
dollars per month, payable in one installment of
$700.00 on the 20th day of each month, beginning July
20, 1993, subject to automatic termination upon (a) the
Wife’s re-marriage, or (b) the death of Wife or
Husband, or (c) the youngest child reaching age
eighteen (18), whichever of said terminating
contingencies shall first occur.
Pursuant to the provision providing for spousal support,
petitioner made payments to his former wife totaling $8,400 in
1995 and $8,400 in 1996. Petitioner treated the payments as
alimony within the meaning of section 215(a) and deducted them
from his gross income in 1995 and 1996 on his Forms 1040, U.S.
Individual Income Tax Returns. Respondent determined that the
payments were not deductible as alimony and issued petitioner a
notice of deficiency.
Discussion
Pursuant to sections 71(a) and 215(a), alimony is taxable to
the recipient and is deductible by the payer. Child support
payments, on the other hand, are neither includable in income
under section 71 nor deductible under section 215. See sec.
71(c). Alimony is 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 this section and not
allowable as a deduction under section 215,
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(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. [Sec. 71(b)(1).]
Child support is that part of a payment which the divorce or
separation instrument fixes as payable for the support of the
children of the payor spouse. See sec. 71(c)(1). An amount is
treated as fixed under section 71(c)(1) and thus treated as child
support if it will be reduced "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)”. Sec. 71(c)(2)(A).
Respondent maintains that petitioner’s payments to his
former spouse are not alimony within the meaning of section 71(b)
and thus are not deductible. Petitioner, on the other hand,
maintains that the payments were made in accordance with the
provision in the Agreement calling for “spousal support, alimony
and maintenance” and that the Agreement had a separate provision
providing for child support. Petitioner also points out that his
“alimony” payments to his former spouse were not reduced, as were
the payments required under the Agreement for child support, in
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1998 when his daughter Jacqueline Joan Bonar began living with
him.
Regardless of the Agreement’s characterization of
petitioner’s payments as alimony, the payments must meet the
specific requirements of the Internal Revenue Code in order to be
deductible from petitioner’s gross income for Federal income tax
purposes. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Section 71(c) specifically provides that a payment will
be “treated as an amount fixed as payable for the support of
children of the payor spouse” if the payments are reduced “on the
happening of a contingency * * * relating to a child”. Temporary
regulations promulgated under section 71 make clear that payments
may be treated as child support “even if other separate payments
specifically are designated as payable for the support of a child
of the payor spouse.” Sec. 1.71-1T(c), Q&A-16, Temporary Income
Tax Regs., 49 Fed. Reg. 34451, 34456 (Aug. 31, 1984).
Under the terms of the Agreement, the payments at issue are
subject to automatic termination upon “the youngest child
reaching age eighteen”. This contingency renders petitioner’s
payments ineligible for treatment as alimony. See Hammond v.
Commissioner, T.C. Memo. 1998-53; Fosberg v. Commissioner, T.C.
Memo. 1992-713. We therefore hold that petitioner’s payments are
not deductible from his gross income in 1995 and 1996.
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Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.