T.C. Summary Opinion 2007-114
UNITED STATES TAX COURT
THOMAS LETTIERI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13055-06S. Filed July 3, 2007.
Thomas Lettieri, pro se.
Travis T. Vance, for respondent.
COHEN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed. 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.
Respondent determined a deficiency of $3,000 in petitioner’s
Federal income tax for 2004. The sole issue for decision is
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whether payments totaling $12,000 made by petitioner to his
former spouse in 2004 are alimony payments as defined by section
71(b) and thus deductible by petitioner under section 215(a).
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the year in issue.
Background
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Newnan, Georgia, at the time he filed his
petition.
Petitioner married Gretchen Von Bergen (Von Bergen) on
June 24, 1972. On July 12, 2002, Von Bergen filed for divorce
from petitioner in the State of Georgia. On that day, petitioner
and Von Bergen signed a document entitled “Divorce Settlement
Agreement Between Gretchen Von Bergen Lettieri and Thomas
Lettieri, July-August 2002” (settlement agreement).
The settlement agreement states:
Husband * * * and Wife * * * have distributed by their
mutual agreement their household furnishings; have sold
their real estate and split equally the proceeds; and
have paid in full their debts.
Husband agrees to transfer to Wife’s TIAA-CREF
Retirement Fund the total sum (approximately $69,000)
in his * * * Pension Plan. This transaction is to take
place within one month of the Divorce decree.
Husband will pay to Wife in $1000/mo. increments (or
more should he choose) the sum of $66,000. These
payments are to be received by the 16th of the month
(late fee: $5/day).
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Husband and Wife will share equally in agreed upon
expenses related to their three non-minor children,
including the education of their 18-year-old. There
are no minor children.
The settlement agreement is silent as to whether the payments are
to terminate upon the death of either party.
In 2004, petitioner made payments to Von Bergen pursuant to
the settlement agreement totaling $12,000. He deducted those
payments as alimony on his 2004 income tax return. Von Bergen
did not include the $12,000 payments received from petitioner as
alimony income on her 2004 return.
Discussion
The parties dispute whether the payments made by petitioner
to Von Bergen are alimony and thus deductible by petitioner under
section 215. Resolution of this dispute depends on whether the
payments, as a matter of law, terminate on the death of Von
Bergen.
Section 215(a) provides a deduction to an individual equal
to the alimony or separate maintenance payments paid during that
individual’s taxable year. Section 215(b) defines alimony as any
payment that is includable in the gross income of the payee under
section 71. Section 71(a) provides for the inclusion in income
of any alimony or separate maintenance payments received during
the taxable year. Section 71(b)(1) defines “alimony or separate
maintenance payment” as any payment in cash if--
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(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.
Under section 71(b)(1)(D), if the payor is liable for any
qualifying payment after the recipient’s death, none of the
related payments required will be deductible as alimony by the
payor. See Kean v. Commissioner, 407 F.3d 186, 191 (3d Cir.
2005), affg. T.C. Memo. 2003-163. Whether a postdeath obligation
exists may be determined by the terms of the divorce or
separation instrument or, if the instrument is silent on the
matter, by State law. Morgan v. Commissioner, 309 U.S. 78, 80-81
(1940); see also Kean v. Commissioner, supra. The parties
dispute whether the payments at issue meet the requirement of
section 71(b)(1)(D). The parties are in agreement that the
divorce decree does not provide any conditions for the
termination of these payments. Respondent maintains that the
payments made by petitioner to Von Bergen are not deductible from
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petitioner’s income as alimony under section 215(a) because the
obligation to make the payments does not terminate at the death
of either party under Georgia law. Petitioner contends that the
payments are deductible because he intended the payments to be
alimony and because the settlement agreement did not specifically
state that the payments do not terminate at the death of
petitioner or Von Bergen.
Although section 71(b)(1)(D), as it was enacted in 1984,
originally required that a divorce or separation instrument
affirmatively state that liability for payments terminate upon
the death of the payee spouse in order to be considered alimony,
the statute was retroactively amended in 1986 so that such
payments now qualify as alimony as long as termination of such
liability would occur upon the death of the payee spouse by
operation of State law. Hoover v. Commissioner, 102 F.3d 842,
845-846 (6th Cir. 1996), affg. T.C. Memo. 1995-183.
Under Georgia law, the obligation to pay periodic alimony
terminates at the death of either party, while the obligation to
pay lump sum alimony in installments over a period of time does
not. Winokur v. Winokur, 365 S.E.2d 94, 95 (Ga. 1988). The
Georgia Supreme Court has held that the obligation to pay lump
sum alimony does not terminate upon the death of either party
because lump sum alimony is in the nature of a property
settlement, regardless of whether it is designated as alimony.
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Id. The Georgia Supreme Court has also established the following
test to be used in determining whether particular payments are
lump sum alimony payable in installments, as opposed to periodic
alimony: “If the words of the documents creating the obligation
state the exact amount of each payment and the exact number of
payments to be made without other limitations, conditions or
statements of intent, the obligation is one for lump sum alimony
payable in installments.” Id. at 96.
The settlement agreement between petitioner and Von Bergen
requires petitioner to pay “the sum of $66,000” to Von Bergen in
monthly payments of at least $1,000. Although the exact number
of payments would have varied if petitioner had paid more than
the minimum $1,000 in any installment, petitioner was not legally
obligated to pay to Von Bergen any more than “the sum of
$66,000”; if petitioner did not have the option in the settlement
agreement of paying more than the required $1,000 each month, he
would have been required by the settlement agreement to pay Von
Bergen exactly 66 payments of $1,000 each. Petitioner’s
obligation to Von Bergen is for an exact sum payable in monthly
installments, which obligation is lump sum alimony under Georgia
law and does not terminate upon the death of either the payee or
the payor. Thus, we hold that the $12,000 paid to Von Bergen in
2004 pursuant to the settlement agreement between petitioner and
Von Bergen does not qualify to be deducted as alimony paid by
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petitioner under section 215. Sec. 71(b)(1)(D); see Mukherjee v.
Commissioner, T.C. Memo. 2004-98.
To reflect the foregoing,
Decision will be entered
for respondent.