T.C. Summary Opinion 2008-123
UNITED STATES TAX COURT
STEVEN F. OHRMAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9541-07S. Filed September 16, 2008.
Michael C. Wetzel, for petitioner.
Kelley A. Blaine, for respondent.
KROUPA, Judge: This case was heard pursuant to the
provisions of section 74631 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
1
All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined deficiencies in petitioner’s Federal
income tax of $11,447 for 2002, $12,687 for 2003, and $15,600 for
2004. (Tax years 2002, 2003, and 2004 will be referred to as the
years at issue.) After concessions,2 the issues for decision
are:
(1) Whether petitioner is eligible for married filing
jointly status for 2002 if he resided in the same household as
his spouse, from whom he was legally separated. We hold that he
is not.
(2) Whether petitioner is entitled to deduct payments he
made to his legally separated spouse as alimony if he continued
to reside in the same household as his spouse during the years at
issue. We hold that he is not.
(3) Whether petitioner is entitled to various deductions
for expenses reported on Schedule A, Itemized Deductions, for
2002 that petitioner’s legally separated spouse made for mortgage
interest, real estate taxes, a charitable contribution, and tax
preparation fees. We hold that he is not.
2
Respondent conceded that petitioner was not liable for sec.
6662 accuracy-related penalties for negligence for 2002, 2003,
and 2004, the years at issue.
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(4) Whether petitioner is entitled to claim dependency
exemptions for his legally separated spouse and her grandniece
for 2002. We hold that he is not.
(5) Whether petitioner is liable for an addition to tax
under section 6651(a)(1) for failure to file a return timely. We
hold that he is not.
Background
The parties submitted this case fully stipulated under Rule
122. The stipulation of facts and the accompanying exhibits are
incorporated by this reference, and the facts are so found.
Petitioner resided in Oregon at the time he filed the petition.
Petitioner and his spouse signed a Stipulated Judgment for
Unlimited Separation (legal separation agreement) in June 2001
citing irreconcilable differences. The legal separation
agreement required petitioner to convey to his spouse his
interest in their personal residence, an individual retirement
account (IRA), a 401(k) account, and an automobile. The legal
separation agreement also provided that petitioner would pay his
spouse certain amounts as spousal support, which were designated
as tax deductible alimony and which terminated at the death of
either party. Petitioner paid his spouse spousal support of
$65,000 in 2002, $40,000 in 2003, and $48,000 in 2004.
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Petitioner and his spouse continued to reside together after
their legal separation at the residence that petitioner’s spouse
received under the legal separation agreement until his spouse
sold the residence on June 10, 2002. The two then rented a room
together in a hotel from June 21 until July 15, 2002, when
petitioner’s spouse purchased a new residence, and the two moved
there together. They lived there until at least December 31,
2004.
Petitioner filed Federal income tax returns for the years at
issue as an unmarried individual and claimed alimony deductions
for spousal support paid to his spouse under the legal separation
agreement per section 1(c). Respondent examined the returns and
proposed adjustments disallowing the claimed alimony deductions
because the Ohrmans resided together despite their legal
separation.
Petitioner and his spouse subsequently prepared amended
returns, however, for the years at issue attempting to elect
married filing joint status. Petitioner claimed no alimony
deductions on the amended returns for any of the years at issue.
Instead, petitioner sought to deduct on the joint return for 2002
amounts his spouse had paid, such as $7,952 in property taxes,
$21,666 in mortgage interest, a $200 charitable contribution, and
tax preparation fees. His spouse had also claimed a minor child,
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her grandniece, known as KAL,3 as a dependent on the return she
had previously filed for 2002, and petitioner and his spouse
claimed the same child as a dependent on the joint return.
Respondent considered the amended returns and issued a
deficiency notice to petitioner regarding the amended return
filed with his spouse for 2002 and his original returns for 2003
and 2004, on which he filed as a single individual. Respondent
determined deficiencies for each of the years at issue,
disallowing joint filing status, the deductions for expenses his
spouse paid, and the dependency exemptions for his spouse and her
grandniece for 2002. Respondent also disallowed the deductions
for alimony for 2003 and 2004 and determined an addition to tax
for 2002. Petitioner filed a timely petition to contest the
determinations in the deficiency notice.
Discussion4
We are asked to address five issues regarding the filing
status and the category of expenses paid by a legally separated
couple who continued to live together after their separation. We
3
The Court uses the initials of minor children. Rule
27(a)(3).
4
We note that petitioner’s spouse, Ruthe Ohrman, is no
stranger to this Court. See Ohrman v. Commissioner, T.C. Memo.
2003-301, affd. 157 Fed. Appx. 997 (9th Cir. 2005). The holding
in that case, which involved innocent spouse relief, is not
inconsistent with our holding.
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first address petitioner’s proper filing status for the years at
issue.
Joint Filing Status
A husband and wife may elect to file jointly. Sec. 6013(a).
An individual who is legally separated from his or her spouse
under a decree of divorce or of separate maintenance shall not be
considered married, however. Secs. 6013(d)(2), 7703(a)(2). We
look to State law to determine whether the taxpayer is “legally
separated” as of the end of the year. Under Oregon law, a
judgment for a permanent and unlimited separation may be rendered
when irreconcilable difference between the parties have caused
the irremediable breakdown of the marriage. Or. Rev. Stat. sec.
107.025(1) (2007). Oregon law does not require, however, that
the spouses live apart before or after a court renders a judgment
for permanent and unlimited separation. See Or. Rev. Stat. sec.
107.025(2) (2007).
Petitioner and his spouse signed the legal separation
agreement in 2001. The legal separation agreement is a decree of
legal separation. It is of unlimited duration and specifies
irreconcilable differences as a jurisdictional basis.
Accordingly, petitioner and his spouse were no longer eligible to
file jointly during the years at issue. We therefore sustain
respondent’s determination that petitioner’s filing status was
single.
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Alimony
We turn next to whether petitioner may deduct spousal
maintenance payments he made to his spouse in 2003 and 2004 even
though they continued to live together.
It is a well-settled principle that tax deductions are a
matter of legislative grace, and taxpayers must show that they
come squarely within the terms of the law conferring the benefit
sought. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79,
84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934); Allen v. Commissioner, T.C. Memo. 2006-11, affd. 204 Fed.
Appx. 564 (7th Cir. 2006). Alimony or separate maintenance
payments are generally deductible from income by the payor and
includable in the income of the payee. Secs. 61(a)(8), 71(a),
215(a) and (b).
The payments must meet certain requirements to be
deductible, however. See secs. 71, 215. The parties agree that
the payments satisfy all requirements of section 71(b)(1)5 except
that the payee spouse and the payor spouse may not be members of
the same household at the time the payment is made. Sec.
5
The other requirements are that the payments be in cash,
be received by a spouse under a divorce or separation instrument
that does not designate the payments as not deductible, and
terminate at the death of the payee spouse. Sec. 71(b)(1)(A),
(B), and (D). The legal separation agreement between petitioner
and his spouse stated that the cash payments were deductible to
petitioner and terminated upon his spouse’s death, as required by
sec. 71(b)(1)(A), (B), (D).
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71(b)(1)(C). Petitioner argues that the same-household
prohibition applies only if the parties are legally separated
under a decree of separate maintenance, not a legal separation
agreement. Petitioner argues that the legal separation agreement
he signed with his spouse is not a decree of separate maintenance
because it fails to require the parties to live apart in the
future. We disagree. Petitioner relies upon several cases,
unlike his own, in which the husband and wife had signed a
temporary separation agreement but continued to live together.
Petitioner and his spouse were legally separated under a decree
of separate maintenance according to Oregon law, and they lived
together. Accordingly, we sustain respondent’s determination
that petitioner may not deduct alimony or separate maintenance
payments to his spouse during the years at issue.
Real Property Taxes and Mortgage Interest Deduction for 2002
We next address whether petitioner may deduct payments for
real estate taxes and home mortgage interest that his spouse
made, not petitioner. A taxpayer may deduct real property taxes
for the year in which they are paid or accrued. Sec. 164(a)(1).
A taxpayer may also deduct mortgage interest payments. Sec. 163.
The mortgage must be the obligation of the taxpayer claiming the
deduction, however, not the obligation of another, for the
mortgage interest to be deductible by that taxpayer. Golder v.
Commissioner, 604 F.2d 34, 35 (9th Cir. 1979), affg. T.C. Memo.
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1976-150; Jones v. Commissioner, T.C. Memo. 2006-176. Petitioner
is not entitled to deduct any amounts for the real property taxes
or mortgage interest payments, which he did not pay and for which
he was not legally responsible. We therefore sustain
respondent’s determinations to disallow petitioner deductions for
these expenses.
Charitable Contribution Deduction for 2002
Petitioner also may not deduct a charitable contribution
that his spouse made. A taxpayer may deduct charitable
contributions made in the taxable year. Sec. 170. Accordingly,
we sustain respondent’s determination denying petitioner a
charitable contribution deduction.
Tax Preparation Fees for 2002
We next address whether petitioner may deduct tax
preparation fees his spouse incurred to prepare a return for
2002. It is well established that fees incurred in the
preparation and determination of Federal taxes may be deductible.
Sec. 212. Petitioner is not entitled to this deduction, however,
because his spouse incurred the expense and they were not
entitled to file a joint return. Accordingly, we sustain
respondent’s determination denying petitioner any tax preparation
fees.
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Dependency Exemption for 2002
The next issue we decide is whether petitioner is entitled
to claim his spouse and her grandniece, KAL, as dependents on the
return petitioner filed for 2002. Petitioner and his spouse were
legally separated as of 2001. Thus, petitioner is not entitled
to a dependency exemption for his spouse because they were
legally separated and could not file jointly.
Petitioner presented no evidence of his relationship to KAL,
and he provided no evidence to support that he was entitled to an
exemption for her. His spouse originally claimed KAL as a
dependent on the single return she filed. Thus, we sustain
respondent on this issue and hold that petitioner is not entitled
to claim his spouse or KAL as a dependent.
Addition to Tax
Respondent determined petitioner was liable for an $18.056
addition to tax under section 6651(a)(1) for failure to file a
return timely for 2002. Section 6651(a)(1) provides for an
addition to tax for failure to file a tax return on or before the
specified filing date. Respondent bears the burden of production
with respect to the addition to tax. See sec. 7491(c); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). To meet this burden,
respondent must produce sufficient evidence that it is
6
The flush language at the end of sec. 6651(a) provides a
minimum of $100 for a sec. 6651(a)(1) addition to tax. There is
no explanation in the record why this does not apply.
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appropriate to impose the addition to tax. See Higbee v.
Commissioner, supra at 446-447. Neither respondent nor
petitioner addressed the issue on brief, and there is no
information in the record indicating when petitioner filed the
return for 2002. Accordingly, we find that respondent did not
meet his burden of production and therefore find that petitioner
is not liable for the late filing addition for 2002.
Conclusion
We sustain respondent’s determinations except with respect
to the addition to tax under section 6651(a)(1).
To reflect the foregoing,
Decision will be entered
under Rule 155.