T.C. Summary Opinion 2010-172
UNITED STATES TAX COURT
MICHAEL WALTER BRAGG, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27942-09S. Filed December 13, 2010.
Michael Walter Bragg, pro se.
Melanie E. Senick, 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
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue.
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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined a deficiency in petitioner’s 2007
Federal income tax of $937.
The sole issue for decision is whether payments made by
petitioner in 2007 to his former wife are deductible as alimony
under section 215.
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. Petitioner resided in the State
of Washington when the petition was filed.
Petitioner and Rosalie Bragg (Ms. Bragg) were married in
approximately 1986. In April 2002, petitioner and Ms. Bragg were
divorced pursuant to a divorce decree approved by the Superior
Court of Washington, County of King. With respect to spousal
support the divorce decree states:
3.7 SPOUSAL MAINTENANCE
The husband shall pay $800.00 maintenance. Maintenance
shall be paid in $400 payments made twice monthly. The
first maintenance payment shall be due the first month
after this Decree is entered.
The husband shall pay $800 per month spousal maintenance to
the wife without a specific ending date due to the wife, at
present, being incapable of earning an adequate income.
However, after five years from the date of this decree, the
husband’s obligation to pay said maintenance shall be
reviewable by motion to the court. In reviewing the
husband’s obligation to pay spousal maintenance, the court
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shall look at each parties [sic] income, assets, living
expenses, and any other factors showing the parties [sic]
respective financial situation(s). The burden of showing
why maintenance should be reduced or stopped altogether
shall be on the husband.
During 2007, petitioner paid Ms. Bragg a total of $6,240.
Throughout 2007, petitioner had $240 from his biweekly paychecks
directly deposited into a checking account for the sole benefit
of Ms. Bragg. Although petitioner was required by the divorce
decree to pay to Ms. Bragg $400 twice monthly (for a total of
$9,600 yearly), petitioner and Ms. Bragg informally agreed to the
lesser amount of $240 due to petitioner’s financial
circumstances.2
At some point in 2006, Ms. Bragg remarried. Petitioner was
not aware of her remarriage until December 2007 when he was
informed of the remarriage by Ms. Bragg’s grandson. Upon
learning of Ms. Bragg’s remarriage, petitioner immediately
stopped the direct deposit into her account.
On his 2007 Federal income tax return petitioner claimed a
deduction of $6,240 for “alimony paid” to Ms. Bragg.
In a notice of deficiency respondent determined the payments
were not alimony and therefore disallowed the claimed deduction.
2
Petitioner explained at trial: “The changing of the
divorce decree would have cost us even more money to get done, so
we didn’t feel it was necessary.”
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Discussion
Section 215(a) allows a deduction for alimony payments paid
during the payor’s taxable year. Section 215(b) defines alimony
or separate maintenance as any “payment (as defined in section
71(b)) which is includible in the gross income of the recipient
under section 71.” Section 71(b) provides a four-step inquiry
for determining whether a cash payment is alimony. 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 includible 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.
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Payments are deductible as alimony only if all four requirements
of section 71(b)(1) are met.
Both parties agree that petitioner’s payments to Ms. Bragg
satisfied the requirements set out in section 71(b)(1)(B), (C),
and (D).3 The parties do not agree, however, on whether the
payments satisfy the requirement that the payments be made under
a divorce or separation instrument. See sec. 71(b)(1)(A).
Section 71(b)(2) provides that a “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 decree (not described in
subparagraph (A)) requiring a spouse to make
payments for the support or maintenance of
the other spouse.
As a general matter, if the language of a statute is
unambiguous on its face, we apply the statute in accordance with
its terms. See, e.g., Garber Indus. Holding Co. v. Commissioner,
124 T.C. 1, 5 (2005), affd. 435 F.3d 555 (5th Cir. 2006).
Section 71 is not a tremendously complicated statute, and its
requirements are clearly set forth. Petitioner made the payments
3
The requirement under sec. 71(b)(1)(D) that there be no
obligation to make payments after the death of the payee spouse
is satisfied by operation of Washington State law under Wash.
Rev. Code Ann. sec. 26.09.170(2) (West 2005) discussed infra.
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to Ms. Bragg pursuant to a divorce decree, which is listed as a
“divorce or separation instrument” in section 71(b)(2)(A).
Despite the fact that petitioner falls within the provisions
of the applicable Federal statute, respondent argues that because
Ms. Bragg remarried in 2006, petitioner’s legal obligation to pay
spousal maintenance terminated as a matter of Washington State
law; thus, respondent contends that the payments were not
received under a divorce instrument as required by section
71(b)(1)(A).4
Wash. Rev. Code Ann. sec. 26.09.170(2) (West 2005) provides:
“Unless otherwise agreed in writing or expressly provided in the
decree the obligation to pay future maintenance is terminated
upon the death of either party or the remarriage of the party
receiving maintenance.” But there is no requirement in section
71(b)(1)(A) that payments be made under a legally enforceable
duty in order to qualify for the alimony deduction. The only
requirement is that any payment be “received by (or on behalf of)
a spouse under a divorce or separation instrument.” Sec.
71(b)(1)(A). Although it was once the case that entitlement to
an alimony deduction under section 71 required payments to be
4
Respondent does not allege that the payments at issue
were disguised child support payments or installments of a
property distribution; rather, his sole argument is that
petitioner’s payments to his ex-wife did not constitute alimony
because they did not meet the definition under the statute as a
result of the operation of Washington State law.
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made under a legally enforceable obligation, it has not been so
for more than 25 years.
Before the Deficit Reduction Act of 1984, Pub. L. 98-369,
sec. 422(a), 98 Stat. 795, section 71(a)(1) of the Internal
Revenue Code of 1954 defined alimony as payments made “in
discharge of * * * a legal obligation which, because of the
marital or family relationship, is imposed on or incurred by the
husband under the [divorce] decree or under a written instrument
incident to * * * divorce or separation.” The statute was
amended in 1984, repealing the “requirement that the payment be
based on a legal support obligation”. H. Rept. 98-432 (Part 2),
at 1069 (1984).
Respondent’s legal argument has as its foundation old law
and does not reflect amendments to the statute. Although there
certainly have been cases holding that voluntary payments made
outside a written instrument incident to divorce are not alimony,
those cases have generally dealt with situations where there was
no proper divorce decree or separation agreement, where a payment
was made before the operative document went into effect, or where
the older version of section 71 applied to the particular case.
See, e.g., Herring v. Commissioner, 66 T.C. 308, 311 (1976)
(holding that payments made under an oral agreement were not
alimony because they were made before the issuance of the divorce
decree); Taylor v. Commissioner, 55 T.C. 1134, 1140 (1971)
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(applying the old version of section 71 and concluding that,
“absent some sort of currently enforceable judicial decree or
order”, section 71 would not apply); Leventhal v. Commissioner,
T.C. Memo. 2000-92 (stating that letters from one spouse’s
attorney to another do not constitute a divorce or separation
instrument); Peterson v. Commissioner, T.C. Memo. 1998-27
(confirming that a California State court’s issuance of a Minute
Order was sufficient under State law to constitute a “divorce or
separation instrument”); Abood v. Commissioner, T.C. Memo. 1990-
453 (applying the pre-amendment version of section 71 to the
facts and clarifying that, under those circumstances, “voluntary
payments are not within the purview of sections 71 and 215”).
This is true even of recent cases. See, e.g., Johnson v.
Commissioner, 441 F.3d 845, 850 (9th Cir. 2006) (affirming the
Tax Court’s holding that the prior version of section 71
applied). There have been no cases firmly on point with the one
at bar.
Respondent’s own regulations do not support his position.
Although section 1.71-1, Income Tax Regs., contains the
antiquated language reflective of the older version of the
alimony statute, see sec. 1.71-1(b), Income Tax Regs. (“Such
periodic payments must be made in discharge of a legal obligation
imposed upon or incurred by the husband because of the marital or
family relationship”), the temporary regulation promulgated along
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with the amended version of section 71 in 1984 reflects the
changes to the statutory language.5 The more recent regulation
requires only that alimony payments meet the following
requirements: (a) That payments be made in cash; (b) that
payments not be designated as excludable from the gross income of
the payee and nondeductible by the payor; (c) that payments be
made between spouses who are not members of the same household;
(d) that the payor has no liability to continue to make payments
after the death of the payee spouse; and (e) that payments are
not treated as child support. Sec. 1.71-1T(a), Q&A-2, Temporary
Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984). Further,
section 1.71-1T(a), Q&A-3, Temporary Income Tax Regs., 49 Fed.
Reg. 34455 (Aug. 31, 1984), makes very clear that “the
[requirement] that alimony or separate maintenance payments be
* * * made in discharge of a legal obligation * * * [has] been
eliminated.” Accordingly, petitioner’s 2007 payments satisfy the
requirements for alimony payments as outlined in the relevant
regulations.
More than 25 years after the enactment of the amended
statute, there is no reason to assume that Congress meant
anything other than what it said in enacting the present version
5
Temporary regulations are entitled to the same weight as
final regulations. See Peterson Marital Trust v. Commissioner,
102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d Cir. 1996); Truck
& Equip. Corp. v. Commissioner, 98 T.C. 141, 149 (1992).
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of section 71. It is not the Court’s place to support
respondent’s attempt to include language Congress itself did not.
Accordingly, we hold that, under the unique facts of this
case, petitioner’s payments made to his former wife in 2007
satisfied the conditions set forth in section 71 and were thus
properly deductible as alimony under section 215 for that taxable
year.
Conclusion
We have considered all of the arguments made by respondent,
and, to the extent that we have not specifically addressed them,
we find them to be moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
for petitioner.