T.C. Summary Opinion 2007-213
UNITED STATES TAX COURT
DENIS M. KATCHMERIC, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12051-05S. Filed December 19, 2007.
Denis M. Katchmeric, pro se.
Andrew M. Stroot, for respondent.
DAWSON, 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. Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue.
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The trial was conducted by Special Trial Judge Carleton D.
Powell, who died after the case was submitted. The parties have
declined the opportunity for a new trial or for supplementation
of the record and have expressly consented to reassignment of the
case for opinion and decision.
Respondent determined a deficiency of $4,916 in petitioner’s
Federal income tax for 2002. The only issue remaining for
decision is whether petitioner may deduct as alimony under
section 215(a) certain payments he made to his wife in 2002.
This requires us to decide whether the payments were made
pursuant to a written separation agreement under section
71(b)(2)(B) and, therefore, qualify as alimony as defined by
section 71(b)(1).1
Background
Most of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
1
In his amended petition filed in this case, petitioner, who
had filed his Federal income tax return for 2002 as “married
filing separately” asserted that he should be entitled to file an
amended joint income tax return for that year even though his
wife would not agree to sign such a return or consent thereto.
Special Trial Judge Powell ruled on that issue at trial, stating
that “you are not entitled to a joint return status. Your wife
has not joined in a joint return. That question is resolved
against you.” Moreover, if either spouse files a separate tax
return for a taxable year, sec. 6013(b)(2)(B) provides that an
election thereafter to file a joint return may not be made after
there has been mailed to either spouse, with respect to such
taxable year, a notice of deficiency under sec. 6212, if the
spouse, as to such notice, files a petition with the Tax Court
within the time prescribed in sec. 6213.
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incorporated herein by this reference. When the petition was
filed, petitioner resided in Fairfax County, Virginia.
Petitioner and Karen A. Deluca (Ms. Deluca) were married in
1984. On October 16, 2001, they separated. Her attorney
notified petitioner by letter dated December 7, 2001, that he had
been retained by Ms. Deluca for the purpose of obtaining a
divorce. In the letter, the attorney stated that he was “in the
process of preparing a Separation and Property Settlement
Agreement” that would incorporate a provision requiring
petitioner to pay Ms. Deluca $1,300 per month as spousal support
until their marital home was sold, and that after the sale his
obligation would be reduced to $1,000 per month. The letter
further stated that the separation agreement, when prepared,
would incorporate the following additional terms:
A. Karen will file for divorce on a no-fault
basis, based upon living separate and apart from you
continuously, without cohabitation, for the appropriate
time required under Virginia law.
* * * * * * *
C. You will continue to pay the mortgage on the
marital home until it is sold. Upon the sale of the
home, after deduction of the customary costs of sale,
you and Karen will divide equally the proceeds.
D. You will continue to provide health insurance
for Karen.
E. You will retain as your separate property all
investments titled in your name alone. Karen will
retain as her separate property all investments titled
in her name alone. In addition, Karen shall retain as
her separate property all investments now titled in
your joint names.
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F. Karen will receive a share of your pension upon
your retirement from the government.
G. Each of you will remain responsible for the
loan payments, maintenance, and insurance for your
respective automobiles.
H. You will pay Karen’s attorney fees in
connection with completing the Separation and Property
Settlement Agreement and obtaining a no-fault divorce.
There is nothing in the record showing that petitioner
responded in writing or orally agreeing to any of the items,
including spousal support, contained in the letter he received
from Ms. Deluca’s attorney. However, each month from January
through August 2002, and again in November and December,
petitioner sent Ms. Deluca a check for $1,300 bearing the
notation “Support”. Each check was endorsed by Ms. Deluca and
deposited in her personal bank account. Petitioner did not make
any payments to her for September and October because he learned
in September 2002 that Ms. Deluca had directed that their Federal
income tax refund for the tax year 2001 claimed on their joint
return be deposited into her personal bank account. The tax
refund amount was greater than $2,600.
Ms. Deluca’s attorney never prepared a separation and
property settlement agreement containing the terms described in
his letter to petitioner dated December 7, 2001.
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Apparently, both Ms. Deluca and petitioner were dissatisfied
with their negotiations regarding spousal support, and other
assets and property items, because she filed a divorce proceeding
in 2002 against petitioner in the Circuit Court of Fairfax
County, Virginia, Chancery No. 182004, in which she sought
pendente lite relief. Their negotiations continued
unsuccessfully. Finally, after conducting hearings, the Circuit
Court judge entered a pendente lite order on January 24, 2003,
which provided, among other things, that petitioner was to pay
directly to Ms. Deluca $1,200 per month as spousal support
beginning February 1, 2003. Both parties were represented by
counsel in that proceeding.
Petitioner and Ms. Deluca did not enter into any other
agreement purporting to be a “written separation agreement” prior
to the issuance of the pendente lite order.
On June 25, 2004, a final decree of divorce was entered by
Judge Keith of the Circuit Court of Fairfax County, Virginia,
which provided for the distributions of marital assets as well as
a further reduction in spousal support, as follows:
ORDERED, ADJUDGED, AND DECREED that beginning in
the month of July, 2004, Defendant shall pay
Complainant for spousal support and maintenance the sum
of Nine Hundred and No Dollars ($900.00) per month.
Payments shall be made on the first (1st) day of each
month beginning July 1, 2004, and continuing on the
first (1st) day of each month thereafter in accordance
with Section 20-109, 1950 Code of Virginia, as amended,
until the death of either party, or until the
remarriage of Complainant or until the Complainant
cohabits with an unrelated male in a relationship
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analogous to a marriage for a period of more than one
(1) year;
AND, IT IS FURTHER ORDERED
* * * * * * *
5. Support is to be paid by a payroll deduction
order to Karen Ann Deluca [listing her savings account
number]. The parties shall give each other and the
Court at least thirty (30) days written notice, in
advance, via certified mail, return receipt requested,
of any change of address and any change of telephone
number within thirty (30) days after such change;
6. In determination of a support obligation, the
support obligation as it becomes due and unpaid creates
a judgment by operation of law.
On his Federal income tax return for 2002, which was filed
as “married filing separately”, petitioner claimed an alimony
deduction of $15,600 for amounts he paid to Ms. Deluca in that
tax year.
Respondent disallowed petitioner’s claimed alimony deduction
in the deficiency notice because verification and acceptable
documents were not provided.
Discussion
A taxpayer may deduct alimony or separate maintenance
payments. Sec. 215(a). Alimony is any payment in cash if, among
other requirements, it is received by (or on behalf of) a spouse
under a divorce or separation instrument. Sec. 71(b)(1)(A). The
term divorce or separation instrument means: (A) A decree of
divorce or separate maintenance or a written instrument incident
to such a decree, (B) a written separation agreement, or (C) a
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decree (not described in subparagraph (A)) requiring a spouse to
make payments for the support or maintenance of the other spouse.
Sec. 71(b)(2). No decree (or order) by the Circuit Court of
Fairfax County was in effect when petitioner made his payments to
Ms. Deluca in 2002. Thus, we must decide whether there was a
written separation agreement in effect before January 24, 2003,
when the pendente lite order fixing spousal support was entered
by that court.
The term “written separation agreement” is not defined in
the Internal Revenue Code, the applicable regulations, or in the
legislative history. Bogard v. Commissioner, 59 T.C. 97, 100
(1972). A written separation agreement is a clear, written
statement of the terms of support for separated parties. In
Bogard v. Commissioner, supra at 101, we stated:
Logically, it appears Congress was interested in a
clear statement in written form of the terms of support
where the parties are separated. In this manner it is
administratively convenient for the Commissioner to
apprise himself of the amount of gross income to the
wife and the corresponding deduction allowable to the
husband. * * *
See also Leventhal v. Commissioner, T.C. Memo. 2000-92; Ewell v.
Commissioner, T.C. Memo. 1996-253.
Letters which do not show a meeting of the minds between the
parties cannot collectively constitute a written separation
agreement. Grant v. Commissioner, 84 T.C. 809, 822-823 (1985),
affd. without published opinion 800 F.2d 260 (4th Cir. 1986).
However, we have recognized that where one spouse assents in
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writing to a letter proposal of support by the other spouse, a
valid written separation agreement has been held to exist. See
Azenaro v. Commissioner, T.C. Memo. 1989-224.
Petitioner contends that he is entitled to an alimony
deduction of $15,600 for the payments he made to Ms. Deluca in
2002 because the December 7, 2001, letter he received from her
attorney contained an offer, among other items, for separation
support payments of $1,300 per month, which he accepted when he
made payment by checks, marked “support”, payable to Ms. Deluca,
and cashed by her in 2002. Although petitioner never answered
either by letter or orally the proposal for spousal support
mentioned in the letter from Ms. Deluca’s attorney, he argues
that he performed pursuant to an executory contract which
satisfied the “written separation agreement” requirement of
section 71(b)(2)(B). To the contrary, respondent contends that
the facts and circumstances in this case do not establish that
petitioner’s payments to Ms. Deluca in 2002 were made pursuant to
a written separation agreement entered into by them.
We agree with respondent for the following reasons. First,
the most that can be said about the attorney’s letter to
petitioner is that it is only evidence of a prospective course of
action. It contained proposals of several terms that might have
been included in a future separation and property settlement
agreement favorable to Ms. Deluca. It was simply the beginning
of a negotiation process by them with respect to spousal support
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and the division of their assets and property. Petitioner
obviously did not agree with all of the proposed items listed in
the letter. At best, there was nothing more than a unilateral
offer to enter into a separation agreement. Estate of Hill v.
Commissioner, 59 T.C. 846, 856-857 (1973).
Second, petitioner’s action in writing checks to Ms. Deluca,
bearing the notation “support”, does not qualify as a writing
showing assent to the attorney’s proposal, as required by the
statute. The fact that petitioner made the notations on the
checks does not show that he agreed to provide support under a
written separation agreement. See Ewell v. Commissioner, supra.
There is no evidence in this record that there was ever any pre-
existing written agreement between Ms. Deluca and petitioner that
set monthly support payments. The parties continued to negotiate
without success and under contentious conditions during most of
2002. Petitioner testified that he retained an attorney in March
of that year and “then we started negotiating.” Their failure to
reach an agreement on the terms of their separation resulted in
Ms. Deluca’s attorney’s filing for her divorce from petitioner in
the Circuit Court of Fairfax County, Virginia. Hearings in that
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proceeding culminated in the pendente lite order that required
spousal support payments of $1,200 per month beginning February
1, 2003.
Third, there was no meeting of the minds between petitioner
and Ms. Deluca with respect to any spousal support payments
before the circuit court entered its pendente lite order on
January 24, 2003. Grant v. Commissioner, supra at 822-823. That
order is strong evidence of the failure of the parties to come to
a prior meeting of the minds. Petitioner testified at trial in
the instant case that “he wasn’t going to pay any more”. It was
then that Ms. Deluca went to the Circuit Court of Fairfax County
and sought the pendente lite order for spousal support. If there
had been an existing written separation agreement at that time,
the circuit court would surely have honored and enforced it as a
binding contract. We think petitioner’s declaration to Ms.
Deluca that he would no longer continue making monthly payments
to her shows that there was not a meeting of the minds with
respect to the proposed terms set forth in her attorney’s letter
of December 7, 2001. What triggered the breakdown in their
negotiations for the amount of spousal support was that Ms.
Deluca was seeking more while petitioner wanted to pay less. The
Circuit Court of Fairfax County resolved their controversy, first
by fixing the amount of monthly spousal support at $1,200 in its
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pendente lite order, and finally in the final decree of divorce
on June 25, 2004, at $900 per month.
Accordingly, on the basis of the facts and circumstances in
this record, we hold that petitioner is not entitled to an
alimony deduction for the payments he made to Ms. Deluca in 2002
because there was no written separation agreement. In reaching
our holding, we have considered the arguments made by the
parties, and, to the extent not mentioned, we conclude that they
are irrelevant, moot, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.