T.C. Summary Opinion 2003-122
UNITED STATES TAX COURT
MICHAEL ROBERT PETERSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12783-02S. Filed September 2, 2003.
Michael Robert Peterson, pro se.
James Brian Urie, for respondent.
PANUTHOS, Chief 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, section references are to the
Internal Revenue Code in effect for the year 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 a deficiency in Federal income tax of
$6,373.56 for the 2000 taxable year. The issue for decision is
whether unallocated support payments constitute “alimony or
separate maintenance payments” that petitioner may deduct under
section 215.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner’s mailing address was Manville, New Jersey.
At the time of trial, petitioner was employed as a police
officer. Petitioner and Dawn M. Peterson (Ms. Peterson) were
married prior to the year in issue. They had two minor children:
Marc and Christopher. In November 1999, petitioner filed for
divorce in the Superior Court of New Jersey, Chancery
Division/Family Part, Hunterdon County (New Jersey court).
The New Jersey court issued and filed on January 27, 2000,
an Order for Pendente Lite Relief (pendente lite order), which
provided in part:
1. Legal custody of the two minor children of the
marriage, Marc and Christopher, shall be shared
jointly. Residential custody of Christopher shall be
with plaintiff father. Residential custody of Marc
shall be with defendant mother.
2. Each child shall alternate weekends with the
other parent from 7:00 p.m. Friday until 7:00 p.m.
Sunday, so that both children are together every
weekend. Furthermore, they shall alternate Wednesday
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evening parenting time from 6:00 p.m. until 9:00 p.m.,
again so the children are together every Wednesday
evening.
* * * * * * *
9. Defendant is hereby granted pendente lite,
unallocated support in the amount of $325 per week,
retroactive to December 23, 1999. Payments shall be
made through income withholding through the Hunterdon
County Probation Department. Plaintiff shall pay all
arrears and the weekly obligation beginning immediately
and keep the account current until he sees the correct
amount being withheld from his paycheck.
The pendente lite order was later modified on February 2,
2000, “so that the award of unallocated support of $325 per week
is retroactive to December 14, 1999, the filing date of
defendant’s cross-motion for support.”
Petitioner’s divorce became effective May 21, 2001.
On April 15, 2001, petitioner filed a Form 1040, U.S.
Individual Income Tax Return, for the 2000 taxable year (2000 tax
return). Petitioner claimed a deduction of $24,424 as alimony
paid.1
Respondent issued petitioner a notice of deficiency dated
May 15, 2002, determining a deficiency in Federal income tax of
1
Although the pendente lite order granted Ms. Peterson
unallocated support of $325 per week for the 2000 taxable year,
petitioner claimed a deduction of $24,424 for alimony paid.
Respondent does not contend that the claimed amount has not been
paid; rather, respondent’s only basis for disallowing the
deduction is his contention that unallocated support payments do
not constitute alimony or separate maintenance payments under
sec. 215. The record also does not indicate whether Ms. Peterson
included any portion of this amount as gross income under secs.
61(a)(8) and 71(a).
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$6,373.56 for the 2000 taxable year. Respondent disallowed the
deduction of $24,424 as alimony payments.2
Petitioner contends that the unallocated support payments
made pursuant to the pendente lite order constitute “alimony or
separate maintenance [payments]” under section 71(b), because,
under New Jersey law, the hypothetical death of Ms. Peterson
would relieve him of any further obligation to make the
unallocated support payments when he has joint custody of his two
minor children. Respondent disagrees that the death of Ms.
Peterson would result in such relief, citing Gonzales v.
Commissioner, T.C. Memo. 1999-332.3
Discussion
Petitioner filed his 2000 tax return on April 15, 2001,
accordingly section 7491(a) is applicable in the instant case.
However, neither party takes a position as to whether the burden
of proof has shifted to respondent under section 7491(a). We
conclude that resolution of the issue whether unallocated support
payments constitute alimony or separate maintenance payments does
not depend upon who has the burden of proof.
2
The notice of deficiency also contains an adjustment of
$717 to the amount of itemized deductions claimed by petitioner
in his 2000 tax return. This adjustment, which is computational
in nature, stems from respondent’s disallowance of petitioner’s
claimed deduction for alimony paid.
3
Neither party cited Kean v. Commissioner, T.C. Memo.
2003-163. We note that Kean was decided on June 4, 2003, after
this case was submitted.
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Payments to support children generally are not deductible.
Sec. 71(c). However, alimony or separate maintenance payments
generally are deductible by the payor spouse. Sec. 215. Alimony
or separate maintenance payments are defined by section 71(b),
which provides in part:
SEC. 71(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
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.
In the present case, the parties focus on whether the
requirements of section 71(b)(1)(D) have been satisfied. These
requirements are satisfied if petitioner had “no liability to
make any such payment for any period after the death of the payee
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spouse [Ms. Peterson] and there [was] no liability to make any
payment (in cash or property) as a substitute for such payments
after the death of the payee spouse.” Id. If petitioner were
obligated to continue making unallocated support payments under
the pendente lite order after the hypothetical death of Ms.
Peterson, then such payments would be nondeductible child support
payments instead of deductible alimony or separate maintenance
payments. “Whether such obligation exists may be determined by
the terms of the applicable instrument, or if the instrument is
silent on the matter, by looking to State law.” Kean v.
Commissioner, T.C. Memo. 2003-163.
The pendente lite order issued by the New Jersey court did
not indicate whether the unallocated support payments would
terminate upon Ms. Peterson’s death. Hence, we turn to New
Jersey law to ascertain whether it would imply a postdeath legal
obligation.
New Jersey has a support statute authorizing courts to award
alimony or child support, either pending the divorce suit or
after final judgment. This statute provides in relevant part:
Pending any matrimonial action brought in this
State * * * the court may make such order as to the
alimony or maintenance of the parties, and also as to
the care, custody, education and maintenance of the
children * * *. * * * Orders so made may be revised and
altered by the court from time to time as circumstances
may require. [N.J. Stat. Ann. sec. 2A:34-23 (West
2003); emphasis added.]
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A court order regarding unallocated support payments is
modifiable. Farmilette v. Farmilette, 566 A.2d 835 (N.J. Super.
Ct. Ch. Div. 1989). Moreover, the obligation to pay alimony ends
at the recipient’s death, and upon such event, a court order
regarding alimony is modifiable. See N.J. Stat. Ann. sec. 2A:34-
23 (West 2003); Jacobsen v. Jacobsen, 370 A.2d 65, 66 (N.J.
Super. Ct. Ch. Div. 1976).
In general, divorce proceedings abate with the death of one
of the parties. Carr v. Carr, 576 A.2d 872, 875 (N.J. 1990).
Issues of custody and support of children do not abate, however.
Jacobsen v. Jacobsen, supra at 66. Regarding the death of the
custodial parent, New Jersey statutory law provides:
In case of the death of the parent to whom the
care and custody of the minor children shall have been
awarded by the Superior Court, or in the case of the
death of the parent in whose custody the children
actually are, when the parents have been living
separate and no award as to the custody of such
children has been made, the care and custody of such
minor children shall not revert to the surviving parent
without an order or judgment of the Superior Court to
that effect. * * * [N.J. Stat. Ann. sec. 9:2-5 (West
2003).]
It “implicitly recognizes the inherent right of the non-custodial
parent to the reversion to his or her custody of the children
born of the marriage upon the custodial parent’s death and the
satisfaction of the statutory conditions.” In re D.T., 491 A.2d
7, 9 n.3 (N.J. Super. Ct. App. Div. 1985) (referring to N.J.
Stat. Ann. sec. 9:2-5 (West 2003)).
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In Gonzales v. Commissioner, T.C. Memo. 1999-332, we held
that the requirement of section 71(b)(1)(D) had not been met and,
therefore, the unallocated support payments were not alimony or
separate maintenance payments. In so holding, we noted that New
Jersey statutes did not say whether unallocated support payments
terminated on the death of the payee spouse. We nonetheless
noted that a New Jersey court order regarding unallocated support
payments is modifiable and that, under the particular facts of
Gonzales, the death of the payee spouse would not have
necessarily relieved the noncustodial payor spouse of his
obligation to make unallocated support payments. We posited that
a court might have reduced the noncustodial payor spouse’s
payments rather than terminate them altogether.
Contrasting Gonzales v. Commissioner, supra, is Kean v.
Commissioner, supra. In the latter case, the Commissioner
argued, and we agreed, that the unallocated support payments made
pursuant to a New Jersey court order were alimony or separate
maintenance payments. We noted, as a distinguishing factor, that
the payor spouse had joint custody during the period when the
unallocated support payments were made. We further noted the
general rule that divorce proceedings terminate with the death of
either spouse. As such, the payor spouse in Kean would have
received sole custody of the children if the payee spouse had
died during the pendency of the divorce proceeding, and there
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would be no logical reason for a court to order the payor spouse
to continue making unallocated support payments.
The present case is similar to Kean v. Commissioner, supra.
During the 2000 taxable year, petitioner had joint legal custody
of Marc and Christopher and residential custody of Christopher.
If Ms. Peterson had died during the pendency of the divorce
proceeding, such proceeding would have abated, while the issue of
residential custody of Marc would not have abated. Petitioner
would then have had to seek a court order or judgment on this
issue, but absent unusual circumstances not present here, custody
would have reverted to petitioner. Similar to Kean, there would
be no logical reason in the present case for the New Jersey court
to order that petitioner continue to make unallocated support
payments.
We conclude that, under the particular facts of this case,
petitioner’s obligation to make unallocated support payments
during the pendency of the divorce proceedings would have
terminated at Ms. Peterson’s death, and as such, the requirements
of section 71(b)(1)(D) are satisfied. We further conclude that
unallocated support payments made in the present case are alimony
or separate maintenance payments for Federal income tax purposes
and that such payments in the amount of $24,424 are deductible by
petitioner under section 215.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for petitioner.