T.C. Summary Opinion 2007-92
UNITED STATES TAX COURT
KENNETH W. AND WALDRAUT N. HINSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12422-06S. Filed June 7, 2007.
Kenneth W. Hinson, pro se.
Lynn M. Curry, for respondent.
ARMEN, 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.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case.
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2003.
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Respondent determined a deficiency in petitioners’ Federal
income tax for 2003 of $2,076.50. The sole issue for decision is
whether Kenneth W. Hinson properly deducted $7,200 paid to his
ex-wife in 2003 as alimony under section 71(b). We hold that he
did not.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits.
At the time the petition was filed, Kenneth W. Hinson
(petitioner) and Waldraut N. Hinson resided in Ponte Vedra Beach,
Florida.2
Petitioner and Linda Hinson were married in December 1969
and divorced in March 1993. The Final Judgment of Dissolution of
Marriage (divorce decree) provided that, inter alia, petitioner
was to pay his ex-wife $1,200 per month in “rehabilitative
alimony” until June 30, 1996. The divorce decree also provided
that petitioner was to pay his ex-wife a total of $72,000 in
“lump-sum alimony”, payable in installments of $600 per month,
beginning July 1, 1996, and ending June 30, 2006. The divorce
2
Although Kenneth and Waldraut Hinson petitioned the Court
in response to respondent’s notice of deficiency, only Mr. Hinson
appeared at trial. Further, the sole issue presented in this
case concerns payments Mr. Hinson made to his ex-wife in 2003.
Therefore, as a matter of convenience, we refer to Mr. Hinson
alone as petitioner.
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decree did not specify whether petitioner’s obligation to make
these payments would terminate upon his ex-wife’s death.
In 2003, petitioner paid his ex-wife $7,200 in monthly
installments per the divorce decree. Respondent contends that
these payments did not qualify as alimony under the Internal
Revenue Code.
Discussion3
Section 71(a) provides the general rule that alimony
payments are included in the gross income of the payee spouse;
section 215(a) provides the complementary general rule that
alimony payments are tax deductible by the payor spouse in “an
amount equal to the alimony or separate maintenance payments paid
during such individual’s taxable year.”
The term “alimony” means any alimony as defined in section
71. Section 71(b) provides:
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
3
The issue for decision is essentially legal in nature;
accordingly, we decide it without regard to the burden of proof.
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includable in gross income * * * 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.
Both parties agree that petitioner’s payments to his ex-wife
satisfied the requirements set out in section 71(b)(1)(A), (B),
and (C). Payment was made in cash, made pursuant to a “divorce
or separation instrument” as described in section 71(b)(2)(C),
and the payment was not ineligible for the section 71 and 215
deduction/inclusion scheme. At the time of payment, petitioner
and his ex-wife were not members of the same household. The
disagreement in this case is solely about whether petitioner’s
payments satisfied section 71(b)(1)(D); i.e., whether
petitioner’s liability to make payments would have terminated in
the event of his ex-wife’s death. If the payments would have
terminated in the event of his ex-wife’s death, the payments
would have been “alimony”. Because it seems clear that
petitioner’s payments would not have terminated in the event of
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his ex-wife’s death, we agree with respondent that the payments
were not alimony.
As petitioner’s divorce decree is silent on whether his
monthly payments to his ex-wife would survive her death, our
analysis is guided by Florida State law. “Although Federal law
controls in determining petitioner’s income tax liability * * *,
State law is necessarily implicated in the inquiry inasmuch as
the nature of petitioner’s liability for the payment” was based
in Florida law. Berry v. Commissioner, T.C. Memo. 2000-373,
affd. 36 Fed. Appx. 400 (10th Cir. 2002); see also, e.g., Sampson
v. Commissioner, 81 T.C. 614, 618 (1983), affd. without published
opinion 829 F.2d 39 (6th Cir. 1987). In Commissioner v. Estate
of Bosch, 387 U.S. 456, 465 (1967), the Supreme Court addressed
the means for determining State law in the context of a Federal
tax case and stated that “the State’s highest court is the best
authority on its own law.”
Florida’s alimony statute specifically permits a trial court
to award alimony in the form of periodic payments, lump-sum
payments, or both. See Fla. Stat. Ann. sec. 61.08(1) (West
2006). “By definition, ‘lump-sum alimony’ is a fixed and certain
amount, the right to which is vested in the recipient and which
is not therefore subject to increase, reduction, or termination
in the event of any contingency, specifically including those of
death or remarriage.” Boyd v. Boyd, 478 So. 2d 356, 357 (Fla.
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Ct. App. 1985). According to the Florida Supreme Court, an award
of lump-sum alimony survives the death of both the obligor and
the obligee. See Canakaris v. Canakaris, 382 So. 2d 1197, 1201
(Fla. 1980); see also Fla. Stat. Ann. sec. 61.075(2) (West 2006);
Filipov v. Filipov, 717 So. 2d 1082, 1084 (Fla. Ct. App. 1998).
Thus, it seems clear that an award of lump-sum alimony in this
case would not meet the requirement of section 71(b)(1)(D) for
deduction eligibility.
Petitioner argues that the label of “lump-sum alimony” in
his divorce decree should not be conclusive. Accordingly, he
directs us to caselaw discussing the reasons behind a typical
award of lump-sum alimony and points to the differences between
his situation and the cases cited by respondent. Although
applying the principle of substance over form is often
appropriate, this Court is not in a position to review the trial
court’s specific award of “lump-sum alimony”, nor is it our place
to second-guess the award’s function on the record we have before
us.
Accordingly, we hold that petitioner’s deduction of the
$7,200 paid to his ex-wife in 2003 was improper as it did not
meet the definition of “alimony” under section 71(b)(1)(D).
To reflect our disposition of the disputed issue,
Decision will be entered
for respondent.