T.C. Summary Opinion 2001-139
UNITED STATES TAX COURT
RANDY & CHARLISS CUSHING FERIANTE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 187-00S. Filed September 5, 2001.
Randy Feriante, pro se.
G. Michelle Ferreira, for respondent.
DINAN, 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. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority. Unless otherwise indicated,
subsequent section references are to the Internal Revenue Code in
effect for the year in issue.
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Respondent determined a deficiency in petitioners’ Federal
income tax of $1,006 for the taxable year 1995.
The issue for decision is whether petitioners are entitled
to a deduction for alimony payments in excess of the amount
allowed by respondent.
Some of the facts have been stipulated and are so found.
The stipulations of fact and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Palo Alto, California, on the date the petition was filed in this
case.
Petitioner husband (petitioner) separated from his former
wife, Laura Feriante (Ms. Feriante), in 1992. After their
separation, petitioner purchased a residence in Palo Alto,
California, solely in his name. Ms. Feriante and petitioner’s
son, David, resided at this residence during the year in issue,
1995. Ms. Feriante eventually met Paul Kent, who moved into the
Palo Alto residence and then married Ms. Feriante during 1995.
The Superior Court of the State of California in and for the
County of Santa Clara ordered petitioner in 1992 to pay Ms.
Feriante monthly spousal support of $4,373 and monthly child
support of $2,007. Petitioner’s marriage to Ms. Feriante
subsequently was dissolved in 1993. A supplemental judgment was
entered by the court in August 1995. This judgment reduced the
monthly child support obligation to $1,800, stated that the
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obligation to make alimony payments to Ms. Feriante ceased by
operation of law1 and gave Ms. Feriante the Palo Alto residence
as her sole property. Under both the predissolution order and
the supplemental judgment, the child support payments were to be
paid to Ms. Feriante.
During 1995 petitioner made a series of payments in
connection with the Palo Alto residence. He made six monthly
mortgage payments of $1,664.81 to the lender and paid property
taxes of $2,884.66 to the county. Also during 1995, petitioner
made a series of monthly payments directly to Ms. Feriante: In
January the payment was $3,500, in February through June the
payments were $2,000 each, and in July through December the
payments were $1,800 each.
On their 1995 joint Federal income tax return, petitioners
claimed a deduction of $15,574 for alimony payments. In the
statutory notice of deficiency respondent disallowed all but
$1,500 of this deduction.2
1
The obligation presumably ceased by operation of law upon
Ms. Feriante’s remarriage. The exact date in 1995 of the
marriage is not in the record.
2
Respondent also allowed petitioners an additional itemized
deduction for mortgage interest expense of $8,367 and an
additional credit for prior year minimum tax, both of which
obviously are not disputed by petitioners. In addition,
respondent made adjustments to the total amounts of petitioners’
itemized deductions and exemption deductions. These are
computational adjustments which will be resolved by the Court’s
holding on the issue in this case.
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“Alimony or separate maintenance payments” are deductible by
the payer in the year paid if they are includable in the payee
spouse’s gross income under section 71. Sec. 215(a) and (b).
Subject to further requirements not relevant here, the phrase
“alimony or separate maintenance payment” is defined as “any
payment in cash if * * * such payment is received by (or on
behalf of) a spouse under a divorce or separation instrument”.
Secs. 215(a), 71(b)(1)(A). Thus, payments of cash to third
parties on behalf of the payee spouse may qualify as alimony or
separate maintenance payments. Sec. 71(b)(1)(A). However, the
payments must be made pursuant to the terms of the divorce or
separation instrument. Id.; sec. 1.71-1T(b), Q&A-6 and 7,
Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984).
If the payments instead are made in lieu of payments required to
be made to the spouse, they qualify as alimony or separate
maintenance payments only if they are made pursuant to a written
request, consent, or ratification from the payee spouse. Id.
Finally, a payment is not includable in the payee spouse’s gross
income under section 71 if it is fixed by the divorce or
separation instrument as payable for the support of the payer
spouse’s children. Sec. 71(c)(1).
The mortgage and tax payments were not made pursuant either
to a divorce or separation instrument or to a written request,
consent, or ratification from Ms. Feriante. Further, whether Ms.
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Feriante had a community property interest in the residence,
which may have been acquired by petitioner prior to the divorce,
is unclear. In any case, petitioner owned at least a one-half
interest in the property. For these reasons, the mortgage and
tax payments are not alimony or separate maintenance payments.
Sec. 71(b)(1)(A); sec. 1.71-1T(b), Q&A-6, 7, Temporary Income Tax
Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984).
Because the payments made by petitioner directly to Ms.
Feriante were for child support, these payments also are not
alimony or separate maintenance payments. Sec. 71(c)(1).
Petitioners argue that the cash payments petitioner made in
January through June were alimony payments, while the mortgage
and tax payments made in those months were made to fulfill
petitioner’s child support obligations. We find this argument to
be disingenuous: The record clearly indicates the cash payments
were child support.
First, as previously noted, petitioner owned the residence
in which Ms. Feriante and petitioner’s son resided. Despite
petitioner’s assertions to the contrary, we find it unlikely that
a court-ordered obligation to pay Ms. Feriante a sum certain each
month could be fulfilled by payments to third parties with
respect to a residence which petitioner owned.
More importantly, however, the amounts of the cash payments
reveal their nature. Petitioner’s obligation to pay spousal
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support, which ceased at an undetermined time in 1995, was in the
monthly amount of $4,373. From January through June, petitioner
was under an obligation to make child support payments of $2,007
per month. In each of those months except January, his cash
payment to Ms. Feriante was $2,000. From July through December,
petitioner was under an obligation to make child support payments
of $1,800 per month. In each of these months, his cash payment
to Ms. Feriante was $1,800. It is clear that these payments were
child support. The sole exception is petitioner’s payment of
$3,500 in January. However, respondent has already allowed
petitioners a deduction of $1,500, which is the amount in excess
of petitioner’s child support payment.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.