T.C. Summary Opinion 2008-50
UNITED STATES TAX COURT
WALTER J. PRZEWOZNIK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15519-06S. Filed May 5, 2008.
Jonathan P. Decatorsmith and Todd Melton (specially
recognized), for petitioner.
Julie A. Jebe, for respondent.
GOLDBERG, Special Trial Judge: This case was heard pursuant
to section 7463 of the Internal Revenue Code in effect at the
time 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, subsequent section references
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are to the Internal Revenue Code in effect for the year in issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
Respondent determined a $3,113 deficiency in petitioner’s
Federal income tax for 2004. The sole issue for decision is
whether petitioner is entitled to an alimony deduction of
$12,4611 for the taxable year in issue.
Background
The stipulation of facts and the attached exhibits are
incorporated herein by reference. At the time the petition was
filed, petitioner resided in Illinois.
During the year in issue, petitioner was employed as a
posting supervisor (responsible for managing the advertising
schedule and maintenance on billboards) with Clear Channel
Outdoor in Chicago.
Petitioner and his former spouse, Lisa Colquitt (Ms.
Colquitt) were married on October 23, 1982, in Cook County,
Illinois. Two children were born of the marriage. On September
16, 2003, a Judgment of Dissolution of Marriage (judgment) was
entered in the Circuit Court of Cook County, Illinois, Domestic
1
Although petitioner claimed an alimony deduction for
payments totaling $12,461 for 2004, the record indicates that
petitioner actually made payments totaling only $12,000 during
2004.
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Relations Division (circuit court). When the judgment was
entered, one of the children--K.P.--was a minor.
In article III of the judgment, the circuit court ordered
petitioner to make monthly payments of $1,000 described as
“unallocated family support.” With respect to “the minor child”
the judgment states that petitioner’s “obligation[2] for the child
as detailed in this Agreement” would cease when “the child
reaches majority or graduates from high school, whichever occurs
last, but in no case later than January 15, 2005.” K.P.
graduated from high school in June 2004 and turned 18 later that
year. The judgment awarded sole care and custody of K.P. to Ms.
Colquitt.
The judgment is otherwise silent as to whether the payments,
or any part thereof, were to be deductible as alimony by
petitioner and includable in gross income by Ms. Colquitt. The
judgment itself is also silent as to whether petitioner’s
obligation to make the payments would survive Ms. Colquitt’s
death.
The judgment incorporates a Uniform Order for Support
(order), which was also entered by the circuit court on September
16, 2003. The order characterizes the payments at issue as
“unallocated support” rather than “maintenance” or “child
support”. The order lists K.P. as the “Child/ren covered by this
2
“Obligation” is not defined in the judgment.
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order”. With respect to the termination of the payments, the
order states:
TERMINATION. This obligation to pay child support
terminates on January 15, 2005 unless modified by
written order of the Court. The termination does not
apply to any arrearage that may remain unpaid on that
date.
The order also provides that the payments at issue were to
be made through an order of support lodged with Clear Channel
Outdoor. The payments were accordingly then deducted from
petitioner’s paychecks bimonthly, and were remitted to Ms.
Colquitt through the Illinois Child Support Disbursement Center.
In accordance with the terms of the judgment a final payment of
$500 was deducted from petitioner’s pay and remitted to Ms.
Colquitt on January 15, 2005.
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). Petitioner did not argue
that section 7491 is applicable, nor did he establish that the
burden of proof should shift to respondent. Moreover, the issue
involved in this case--alimony--is a legal one to be decided on
the record without regard to the burden of proof. Petitioner,
therefore, 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.
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Section 215 allows an individual a deduction for alimony or
separate maintenance payments made during a year if those amounts
are includable in the gross income of the recipient under section
71(a). However, payments to support children generally are not
deductible. See sec. 71(c)(1). Section 215 provides in relevant
part:
SEC. 215. ALIMONY, ETC., PAYMENTS
(a) General Rule.--In the case of an individual, there
shall be allowed as a deduction an amount equal to the
alimony or separate maintenance payments paid during such
individual’s taxable year.
(b) Alimony or Separate Maintenance Payments Defined.--
For purposes of this section, the term “alimony or separate
maintenance payment” means any alimony or separate
maintenance payment (as defined in section 71(b)) which is
includible in the gross income of the recipient under
section 71.
Section 71(a) provides that “Gross income includes amounts
received as alimony or separate maintenance payments.” As
previously stated, alimony or separate maintenance payments are
defined by section 71(b)(1), which provides in part:
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 includible in
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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.
The test under section 71(b)(1) is conjunctive; a payment is
deductible as alimony only if all four requirements of section
71(b)(1) are satisfied. See Jaffe v. Commissioner, T.C. Memo.
1999-196. The judgment is silent as to whether the petitioner
would be required to make payments upon the death of the Ms.
Colquitt. Therefore, we must turn to the relevant law of the
jurisdiction. Morgan v. Commissioner, 309 U.S. 78, 80 (1940);
Kean v. Commissioner, T.C. Memo. 2003-163, affd. 407 F.3d 186 (3d
Cir. 2005).
Illinois law provides that “Unless otherwise agreed by the
parties in a written agreement set forth in the judgment or
otherwise approved by the court, the obligation to pay future
maintenance is terminated upon the death of either party”. 750
Ill. Comp. Stat. Ann. 5/510(c) (West 2004). Accordingly, it
appears that the judgment meets the criteria set forth in section
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71(b)(1). Section 71(c)(1), however, provides that section 71(a)
“shall not apply to that part of any payment which the terms of
the divorce or separation agreement fix * * * as a sum which is
payable for the support of children of the payor spouse.”
Petitioner argues that because the judgment is silent as to
a fixed amount of child support, the “unallocated family support”
payments must be alimony. See Commissioner v. Lester, 366 U.S.
299 (1961). Petitioner relies on Lester for the proposition that
unless the judgment specifies a specific sum as child support,
none of an “unallocated” payment will be treated as child support
under section 71(c)(1). To be sure, in applying Lester, this
Court had repeatedly refused to allow inference, intent, or other
nonspecific designations--such as “unallocated family support”--
to override the clearly defined rule of section 71(c)(1). See,
e.g., Mass v. Commissioner, 81 T.C. 112, 123 (1983); Blakey v.
Commissioner, 78 T.C. 963 (1982); Giordano v. Commissioner, 63
T.C. 462 (1975); Grummer v. Commissioner, 46 T.C. 674 (1966).
The Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 422,
98 Stat. 795, which is applicable to divorce instruments executed
after December 31, 1984, amended section 71 and overturned the
result in Lester that held that no amount would be considered
child support unless it was specifically designated as such in
the divorce or separation agreement.
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Under the current statute, if any amount specified in the
instrument will be reduced: (1) Upon the happening of a
contingency related to a child of the payor or (2) at a time
which can clearly be associated with such a contingency, then the
amount of the specified reduction will be treated as child
support rather than alimony. Sec. 71(c)(2); Berry v.
Commissioner, T.C. Memo. 2005-91.
With respect to section 71(c)(1), petitioner makes the
following contentions as to why the payments at issue are alimony
and not child support: (1) The term “unallocated family
support”--as used in the judgment--does not explicitly fix a sum
as child support; (2) article III of the judgment does not refer
specifically to any child; (3) petitioner and Ms. Colquitt
reached a compromise during their divorce proceedings (and before
entry of the judgment) that petitioner would pay Ms. Colquitt a
“settlement sum of $12,000 in monthly installments” and the
payments in issue were in accordance with this agreement; and (4)
the contingency clause in article VIII of the judgment has no
bearing as to the classification of the payments. On the basis
of the foregoing, petitioner believes that he is entitled to an
alimony deduction for the payments he made in 2004. For the
reasons discussed infra, we disagree.
We first note that State law provides no guidance as to the
meaning of “unallocated family support”, as that term is not
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defined by the Illinois statutes pertaining to matrimony. We
also disagree with petitioner as to the presence of “clear
language” in the judgment that indicates that the payments
described in article III were intended to be for alimony and not
for child support. Finally, we reject petitioner’s argument that
it was petitioner and Ms. Colquitt’s intention throughout their
divorce proceedings that petitioner would pay Ms. Colquitt a
$12,000 settlement in monthly installments of $1,000. The
judgment is silent as to this purported agreement; and because
the $1,000 payments at issue began on October 1, 2003, and ended
on January 15, 2005, the total amount petitioner paid--$15,500--
also fails to comport with this alleged $12,000 settlement
figure.
On the entire record before us, and for the reasons
discussed infra, we hold that the payments at issue were not
alimony. While we do not rely exclusively on the language in the
contingency clause, it nonetheless supports our conclusion.
First, we believe that the order is inextricably connected
with the payments provided for under article III of the judgment
because the order expressly refers to K.P. as the child “covered
by [the] order”. As the only issue covered by the order is the
$1,000 payments, we fail to see how the payments were not
contemplated as being for the support of petitioner’s minor
child. Second, petitioner testified that the payments were
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deducted bimonthly from his paycheck and remitted--pursuant to
the order--to Ms. Colquitt by the Illinois Child Disbursement
Center. We fail to see how that particular agency would be used
other than for the disbursement of child support payments.
Finally, the order’s termination clause, previously quoted,
specifically refers to the $1,000 monthly payments as “child
support” and states that the “child support terminates on January
15, 2005.” Petitioner testified that a final payment was
deducted from his paycheck on January 15, 2005. Accordingly, and
on the basis of the foregoing, we fail to see how petitioner and
Ms. Colquitt’s use of the term “unallocated family support”
could--by itself--characterize the payments as alimony where the
aforementioned facts suggest the contrary.
Moreover, pursuant to section 72(c), the contingency clause
in the judgment supports our conclusion because it reduced the
amount of petitioner’s payments as a result of either the
happening of an event related to K.P. or at a time clearly
associated with such an event. The last deduction from
petitioner’s pay occurred on January 15, 2005, the same date
specified in the contingency clause. We simply do not follow
petitioner’s argument that the date of his last payment and the
date specified in the contingency clause were identical as a
result of coincidence. We are also not persuaded to hold for
petitioner on the ground that January 15, 2005, was not the date
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on which K.P. turned 18 or graduated from high school (the two
events specifically mentioned in the contingency clause).
Our review of the entire record--including the contingency
clause--has led us to conclude that the phrase “unallocated
family support” as used in the judgment is not alimony but child
support. The facts lead us to conclude that the monthly payments
at issue, which were made pursuant to an order referring to the
payments as “child support”, and which ended on a date specified
in a contingency clause in the judgment, were--for child support.
The facts indicate the true nature of the payments was for child
support and not alimony, and taking into account that the
cessation date of the payments comports with a date specified in
a contingency clause pursuant to section 72(c), we cannot hold
that petitioner is entitled to an alimony deduction on the basis
of his use of the ambiguous term “unallocated family support”.
Accordingly, and on the basis of the foregoing,
Decision will be entered
for respondent.