T.C. Summary Opinion 2004-26
UNITED STATES TAX COURT
JOHN SCOTT KRACKE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1092-03S. Filed March 9, 2004.
John Scott Kracke, pro se.
William C. Bogardus, for respondent.
POWELL, Special Trial Judge: This case was heard pursuant
to the provisions of section 74631 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.
1
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 of $19,578 in
petitioner’s 2000 Federal income tax. The issue is whether
$48,000 of the $128,000 payments petitioner made to his former
wife constitute deductible alimony payments or, in the
alternative, nondeductible child support payments. Petitioner
resided in Darien, Connecticut, at the time the petition was
filed.
Background
Petitioner married Julie Skakel (Ms. Skakel-Kracke) on
August 4, 1984. Petitioner and Ms. Skakel-Kracke had three
children during their marriage: John Scott, Jr. (Scotty), born
May 8, 1986; George Maxwell (George), born December 26, 1989; and
Claire Hayden, born June 7, 1991. The Superior Court, Judicial
District of Stamford/Norwalk, State of Connecticut, entered a
Judgment on November 18, 1999, whereby petitioner and Ms. Skakel-
Kracke were divorced. The Separation Agreement, executed the
same day, provided in pertinent part:
IV. PERIODIC ALIMONY
4.1 The $9K Monthly Base Amount. In a continuation of
Judge Tierney’s 1/14/98 Pendente Lite Order (No. 110.00)
(the “P/L Order”), the per month base amount of $9K (or,
$108K/year) shall be paid to the Wife as unallocated
periodic alimony and support (the “Periodic Alimony”), which
amount is predicated on the Husband’s current annual income
of $258.7K, as follows: (i) the P/L Order shall continue in
full force and effect until the last day of the month during
which a judgment (the “Judgment”) is entered in the Action;
and (ii) on the fourth business day of each succeeding
month, the Husband shall pay the Periodic Alimony (subject
to the other terms of this Agreement). The monthly amount
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shall be reduced by $2K on September 1st of the summer
immediately succeeding each of Scotty’s and George’s
graduation from high school. (Illustration: Assuming Scotty
graduates from high school on 6/20/2004, the Periodic
Alimony would step down from $9K per month to $7K per month
effective 9/1/2004.)
* * * * * * *
4.2 The Additional Periodic Alimony Re: An Increase in
the Husband’s Compensation. * * * [T]he Husband shall pay
20% (the “20% Payment”) of the gross amount of any bonuses,
commissions or additional salary received in a calendar year
* * * to the Wife as additional Periodic Alimony * * *.
Pursuant to the Separation Agreement, petitioner paid Ms.
Skakel-Kracke $128,000 in 2000, which consisted of the $9,000
monthly payments plus 20 percent of his bonuses. In preparing
his 2000 Federal income tax return, petitioner deducted $128,000
as alimony payments. Respondent, in the notice of deficiency,
disallowed $48,000 of the payments ($2,000 each per month for
Scotty and George).
Discussion
Section 215(a) allows a deduction for amounts paid for
"alimony or separate maintenance payments" that are includable in
the recipient’s gross income under section 71(a). An alimony or
separate maintenance payment is defined by section 71(b). Sec.
215(b). Section 71(c) provides, in pertinent part:
(c) Payments to Support Children.–-
(1) In general.–-* * *[Amounts received as
alimony or separate maintenance payments] 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
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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),
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.
The Separation Agreement provides for a reduction of the
unallocated periodic alimony and support payments by $2,000 each
for Scotty and George on a certain date after each of their
graduations from high school, and that provision is clearly a
contingency related to those children. See Hammond v.
Commissioner, T.C. Memo. 1998-53 (payments determined to be child
support when the payments terminated on the taxpayer’s child’s
18th birthday); Israel v. Commissioner, T.C. Memo. 1995-500
(payment determined to be child support when contingent on child
residing with recipient spouse).
Petitioner asserts that it is inequitable to treat the
payments as child support because it was intended by the parties
that he would be able to deduct the payments in full. This may
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have been what the parties intended, but we cannot rewrite the
Separation Agreement. While we may be sympathetic with
petitioner’s position, this Court also cannot rewrite statutes
enacted by Congress in order to reach what may be perceived as a
more equitable result. See Commissioner v. Gooch Milling &
Elevator Co., 320 U.S. 418 (1943). Respondent is sustained.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.