T.C. Summary Opinion 2006-162
UNITED STATES TAX COURT
LEONARD SALESKY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20376-04S. Filed October 5, 2006.
Leonard Salesky, pro se.
James N. Beyer, for respondent.
GOLDBERG, 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 at issue, and Rule references are to the Tax
Court Rules of Practice and Procedure.
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Respondent determined a deficiency of $2,894.58 in
petitioner’s 2002 Federal income tax. The sole issue for
decision is whether petitioner is entitled to deduct attorney’s
fees paid in 2002 as alimony pursuant to section 71(b). We hold
that he is not.
Background
This case was submitted fully stipulated pursuant to Rule
122. The stipulation of facts and the attached exhibits are
incorporated herein by reference.
At the time the petition was filed, petitioner was
incarcerated at the South Woods State Prison in Bridgeton, New
Jersey.
Petitioner was married to Anna L. Salesky, although the
underlying record is silent as to the actual dates of their
marriage and separation. Ms. Salesky filed a petition seeking
the dissolution of the marriage in the Superior Court of New
Jersey, Chancery Division - Family Part, Burlington County, New
Jersey. On June 4, 2002, the Court ordered petitioner to
contribute the sum of $7,500 directly to the law firm of Domers &
Bonamassa, P.C., as and for Ms. Salesky’s counsel’s fees in
connection with the underlying divorce proceeding.
Paragraph 2 of the order provided: “Defendant shall
contribute the sum of $7,500 as and for plaintiff’s counsel fees
to date in the above captioned matter. Said amount shall be paid
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within 45 days directly to the law firm of Domers & Bonamassa,
P.C.” The order was silent as to the tax treatment of the
payment or whether petitioner’s obligation to pay Ms. Salesky’s
attorney’s fees would terminate upon her death. Petitioner paid
Domers & Bonamassa, P.C., $7,500 in 2002.
Petitioner timely filed his 2002 Federal income tax return,
as a married individual, filing separately. Petitioner and Ms.
Salesky did not live together in 2002.
Petitioner claimed an alimony deduction on line 33a of his
2002 return of $25,375. Respondent disallowed $7,500 of the
amount claimed on line 33a. This was the only adjustment that
respondent made to petitioner’s 2002 return.
Discussion
The Commissioner’s determinations are presumed correct, and
taxpayers generally bear the burden of proving otherwise. Welch
v. Helvering, 290 U.S. 111, 115 (1933). Accordingly, petitioner
bears the burden of proving that respondent’s determination in
the notice of deficiency is erroneous. See Rule 142(a); Welch v.
Helvering, supra at 115.
Taxation of Alimony
An individual may deduct from his or her income the payments
he or she made during a taxable year for alimony or separate
maintenance. Sec. 215(a). Conversely, the recipient of alimony
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or separate maintenance payments must include those payments when
calculating his or her gross income. Sec. 61(a)(8).
Section 71(b)(1) defines “alimony or separate maintenance
payment” as 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.
Any portion of a payment that fails to meet any one of the
four provisions “(A) through (D) as enumerated in section 71” is
not alimony and accordingly, is not deductible by petitioner.
Ribera v. Commissioner, T.C. Memo. 1997-38, was affd. without
published opinion 139 F.3d 907 (9th Cir. 1998).
Section 71(b)(2) defines a “divorce or separation
instrument” as:
(A) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
(B) a written separation agreement, or
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(C) a decree (not described in subparagraph (A))
requiring a spouse to make payments for the support or
maintenance of the other spouse.
Characterization of Attorney’s Fees Payment
Petitioner argues that he is entitled to an alimony
deduction for the $7,500 paid as attorney’s fees to Ms. Salesky’s
counsel because the payment satisfies the requirements of section
71. Respondent concedes that while the payment does meet section
71(b)(1)(A) through (C), it fails to satisfy section 71(b)(1)(D)
because petitioner would have remained liable to pay the fees in
the event of Ms. Salesky’s death.
The order directing petitioner to pay Ms. Salesky’s
attorney’s fees did not provide whether petitioner’s
responsibility to make the payment would terminate in the event
of Ms. Salesky’s death. When an order does not specify whether
an obligation to make such a payment would cease upon the death
of the payee spouse, the Court must turn to the applicable State
law to resolve whether the death of a payee spouse would
terminate the obligation imposed by the order. Kean v.
Commissioner, 407 F.3d 186, 191 (3d Cir. 2005) (interpreting New
Jersey law and quoting I.R.S. Notice 87-9, 1987-1 C.B. 422 (“The
termination of liability need * * * not be expressly stated in
the instrument [if] * * * the termination would occur by
operation of State law.”)), affg. T.C. Memo. 2003-163.
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New Jersey State law is clear that a spouse’s obligation
pursuant to a divorce or separation instrument to pay attorney’s
fees will survive the death of an ex-spouse. Williams v.
Williams, 59 N.J. 229 (1971). The court in Williams concluded
that although “counsel fees and costs are awarded to the
litigant, they properly ‘belong’ to counsel”. Id. at 234.
Therefore, an attorney has a vested interest in the receipt of
fees and costs from the payor spouse irrespective of whether or
not the payee spouse dies before entry of a final divorce decree.
Furthermore, this Court has consistently held that when
State law provides that a spouse’s obligation to pay attorney’s
fees survives the death of the payee spouse, and the divorce or
separation agreement is otherwise silent, then payment of
attorney’s fees and costs will not constitute alimony pursuant to
section 71(b). See, e.g., Zinsmeister v. Commissioner, T.C.
Memo. 2000-364, affd. 21 Fed. Appx. 529 (8th Cir. 2001); Smith v.
Commissioner, T.C. Memo. 1998-166; Ribera v. Commissioner, T.C.
Memo. 1997-38. Accordingly, because petitioner was liable to
pay, and in fact, did pay, $7,500 as and for Ms. Salesky’s
attorney’s fees, and because petitioner would have been liable to
pay the fees even in the event of Ms. Salesky’s death, the
payment cannot be alimony pursuant to section 71, nor can
petitioner take a deduction for the payment under section 215(a).
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Finally, it is of no legal consequence that petitioner
satisfied his obligation to pay Ms. Salesky’s attorney’s fees
while she was still alive, or that she was alive at the time the
underlying petition was filed. The dispositive question is
whether or not petitioner would have remained under an obligation
to pay the fees had Ms. Salesky died.
Clearly, under New Jersey law, petitioner would be liable to
pay the attorney’s fees. Since we have already determined that
petitioner would have been obligated to pay the fees,
petitioner’s argument that the payment should be categorized as
alimony because Ms. Salesky was still alive at the time it was
made is without merit and will not be afforded further
consideration.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.