T.C. Summary Opinion 2005-50
UNITED STATES TAX COURT
GERALD BARLOW, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5956-04S. Filed April 19, 2005.
Gerald Barlow, pro se.
Lauren B. Epstein, 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 when 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, all subsequent section references are to the Internal
Revenue Code in effect at relevant times.
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Respondent determined a deficiency of $5,214 in petitioner’s
Federal income tax for 2000. The sole issue for decision is
whether payments of $23,3781 petitioner made to his former spouse
during the year in issue were properly deductible as alimony.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated by this reference. At the time of filing the
petition, petitioner resided in Lakeland, Florida.
Petitioner and his former wife divorced on July 15, 1991,
after 37 years of marriage. Their divorce proceedings were
adjudicated by the Circuit Court of Polk County, Florida (Florida
circuit court).
In a Final Judgment of Dissolution of Marriage (divorce
decree), dated July 15, 1991, the Florida circuit court ordered
an equitable distribution of marital assets and awarded alimony
to petitioner’s former wife. As relevant to this discussion, the
equitable distribution of marital assets included a provision
addressing the division of petitioner’s retirement plan
1
All amounts have been rounded to the nearest dollar.
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benefits. Specifically, the divorce decree provided:
1. Equitable distribution of marital assets shall be
as follows:
* * * * * * *
d. The Wife is further awarded the following:
* * * * * * *
4. One-half of Husband’s retirement plan
with City of Lakeland and one-half of
Husband’s retirement/pension plan with State
of Florida.
In regard to alimony, the Florida circuit court, in a separate
provision of the divorce decree, ordered:
2. The Husband shall pay to the Wife the alimony
awarded to her in this Court’s Temporary Order dated
February 25, 1991.
The above-referenced Temporary Order dated February 25, 1991, was
entered by the Florida circuit court following a hearing on
petitioner’s former wife’s Motion for Temporary Alimony. The
Court ordered: “The Husband shall pay to the Wife temporary
alimony in the amount of $1,500.00 per month. Same shall be
payable weekly in the amount of $348.84 to begin on February 15,
1991 until further notice.”
On December 18, 1992, petitioner and the City of Lakeland
entered into an assignment agreement with respect to petitioner’s
Employee Pension Plan and Police Officer’s Supplemental
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Retirement Plan (supplemental plan).2 Pursuant to the terms of
the assignment, petitioner’s former wife was assigned a one-half
interest in petitioner’s net monthly retirement benefits from
both the Employee Pension Plan and the supplemental plan.
In taxable year 2000, petitioner’s former wife received
total payments of $23,378 from petitioner’s retirement plans with
the City of Lakeland, consisting of $16,347 from petitioner’s
Employee Pension Plan and $7,031 from petitioner’s supplemental
plan. There is no evidence that petitioner made any other
payments to his former wife in 2000.3
On his 2000 Federal income tax return, petitioner claimed a
deduction of $23,378 for alimony payments. In a notice of
deficiency dated January 6, 2004, respondent disallowed the
deduction on the ground that the payments did not constitute
alimony.
2
Although the divorce decree referred to petitioner’s
retirement plans with the City of Lakeland and the State of
Florida, the record in this case does not involve any retirement
plan with the State of Florida.
3
There is no evidence in the record that petitioner made
any payments in 2000 in accordance with his obligation to pay
alimony of $1,500 per month. Petitioner’s obligation to provide
spousal support may have terminated. Regardless, it is clear
from the record that petitioner relied solely upon the
assignments from his City of Lakeland retirement plans as the
basis for claiming an alimony paid deduction on his 2000 return.
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Discussion
The Federal tax consequences to both the paying spouse and
receiving spouse of a payment made incident to divorce depend
upon the characterization of such payment. Property settlements,
or equitable divisions of marital property, are generally neither
deductible from the income of the paying spouse nor includable in
the income of the receiving spouse. Sec. 1041. On the other
hand, payments made or received as alimony are generally
deductible by the paying spouse under section 215(a) and
includable in gross income by the receiving spouse under sections
61(a)(8) and 71.
Section 215(b) provides that the paying spouse may deduct a
payment as alimony if the payment is “includible in the gross
income of the recipient under section 71”. Section 71(b)(1)
defines an alimony payment as any cash payment meeting each of
the following four criteria:
(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
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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.
Respondent contends that the $23,378 paid from petitioner’s
City of Lakeland retirement plans is not alimony because
petitioner does not satisfy either subparagraph (B) or (D) of
section 71(b)(1).
We first address the requirement at section 71(b)(1)(B),
which provides that a payment will not be alimony if the
governing divorce or separation instrument designates the payment
as not includable in gross income under section 71 and not
allowable as an alimony deduction under section 215. A divorce
or separation instrument “contains a nonalimony designation if
the substance of such a designation is reflected in the
instrument”. Estate of Goldman v. Commissioner, 112 T.C. 317,
323 (1999), affd. sub nom. Schutter v. Commissioner, 242 F.3d 390
(10th Cir. 2000). Generally, the divorce or separation agreement
must provide a “clear, explicit and express direction” that the
payments are not to be treated as alimony, but the designation
need not mimic the statutory language of sections 71 and 215.
Richardson v. Commissioner, 125 F.3d 551, 556 (7th Cir. 1997),
affg. T.C. Memo. 1995-554; Estate of Goldman v. Commissioner,
supra at 323.
In this case, the language of the divorce decree
unambiguously designates the payments from petitioner’s
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retirement plan benefits as nonalimony. Petitioner’s former wife
was awarded a one-half interest in petitioner’s retirement plan
benefits pursuant to paragraph 1 of the divorce decree, which
began: “Equitable distribution of marital assets shall be as
follows”. Among the items of marital assets subject to equitable
distribution were petitioner’s retirement plan benefits, as
specifically addressed in paragraph 1.d.4 of the divorce decree.
While the Florida circuit court also specifically granted alimony
to petitioner’s former wife, this award was made pursuant to
paragraph 2 of the divorce decree and was not part of the Florida
circuit court’s equitable distribution of marital assets.
We conclude that the divorce decree clearly, explicitly, and
expressly designated the payments from petitioner’s retirement
plans as nonalimony payments.4
Since petitioner does not satisfy subparagraph (B) of
section 71(b)(1), it is unnecessary to consider subparagraph (D)
of the same section. Respondent’s determination that petitioner
is not entitled to an alimony deduction in 2000 is sustained.
4
Moreover, the Florida circuit court, in a postdivorce
hearing convened on Feb. 28, 1992, to address petitioner’s
request to modify the divorce decree’s distribution of his
retirement plan benefits, concluded that the distribution was “a
property plan distribution the court made” and that the decision
“was not modifiable because it’s not alimony”.
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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 respondent.