T.C. Summary Opinion 2011-18
UNITED STATES TAX COURT
ERIC S. KNOEDLER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27181-09S. Filed February 28, 2011.
Eric S. Knoedler, pro se.
Thomas D. Yang, for respondent.
LARO, 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 other court, and this
opinion shall not be treated as precedent for any other case.
1
Subsequent section references are to the applicable
versions of the Internal Revenue Code, and Rule references are to
the Tax Court Rules of Practice and Procedure.
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This case is before the Court for decision without trial.
See Rule 122. Petitioner petitioned the Court to redetermine
respondent’s determination of a $2,993 deficiency in his 2007
Federal income tax. We decide whether petitioner may deduct as
alimony $12,000 he paid pursuant to his divorce from his former
wife. We hold that petitioner may not deduct any of that amount.
Background
All facts were stipulated or contained in the exhibits
submitted with the parties’ stipulation of facts. Those
stipulated facts and exhibits are incorporated by this reference
and are so found. Petitioner resided in Illinois when the
petition was filed.
Petitioner married Mary Vogt-Knoedler (Ms. Vogt-Knoedler) in
1980, and they had two children: J.K., born in 1985, and S.K.,
born in 1987 (collectively, children). In 2000 Ms. Vogt-Knoedler
commenced a divorce action in the Court of Common Pleas of Monroe
County, Pennsylvania (State court). Petitioner and Ms. Vogt-
Knoedler entered into a postnuptial agreement (agreement) on
November 5, 2000. The agreement provided:
5. HUSBAND’S SUPPORT OF FAMILY: Husband agrees
that Wife is the primary custodian for the children.
Prior to the graduation of * * * [S.K.] from high
school * * * Husband shall provide funds in the amount
of $2,000.00 per month for Wife’s use for her care of
the children and her own personal expenses. * * *
Should Wife either remarry or cohabitate with someone
of the opposite sex for more than one month, then Wife
agrees to deposit ½ of the monthly $2,000.00 family
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support payment into a separate bank account in trust
for the children’s college education.
Following * * * [S.K.]’s graduation * * * the
support amount shall be adjusted to $1,000.00 per month
per child in college. Further Husband shall only be
responsible for 4 years of college education per child;
this obligation will terminate upon either child’s
decision to withdraw from one full year of college
(i.e., withdrawal from two concurrent semesters of
college).
* * * * * * *
(14) SURVIVAL OF THIS AGREEMENT: The parties
agree * * * that this Agreement shall be incorporated
into any divorce decree subsequently entered by any
court of competent jurisdiction pursuant to any divorce
proceedings that have been instituted by the parties.
The * * * [State court], upon entry of judgment for
divorce, shall retain the right to enforce the
provisions and terms of this Agreement. This
Agreement, however, is not modifiable by the * * *
[State court], it being the interest of the parties
hereto that this Agreement shall not merge into such a
subsequent decree of divorce, but shall survive the
entry of any such decree and be forever binding and
conclusive on the parties.
The State court finalized the divorce by decree on March 22,
2002. On October 8, 2002, petitioner moved the State court to
allocate the $2,000 per month paid for “family support” as
spousal support and/or child support. In granting petitioner’s
motion, the State court opined that
Although the Agreement specifies the amount of
“family support,” it is not clear what portion of the
support was intended as spousal support and what
portion is child support. What is clear from the
Agreement is that if the Wife remarries or cohabitates
for longer than one month with someone of the opposite
sex, half of the “family support” payment is to be
deposited into a separate bank account in trust for the
children’s college education. This seems to indicate
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that half of the family support is actually spousal
support.
* * * * * * *
We find that in view of the surrounding
circumstances and purpose of the contract, the
allocation of the amount of $1,000.00 as spousal
support is warranted. This Court has not changed,
altered or modified the terms of the Agreement as
Husband will continue to pay support in the amount of
$2,000.00 per month as family support. However, the
Court will designate or apportion the amount to
designate $1,000.00 per month as spousal support until
such time as Wife remarries or cohabitates with a
member of the opposite sex for longer than one month.
* * *
S.K. graduated from high school in 2006 and was enrolled at
a college in 2007. J.K. was not enrolled at a college in 2007.
In 2007, petitioner paid $12,000 to Ms. Vogt-Knoedler and
deducted that amount as “alimony paid” on his 2007 Federal income
tax return. Ms. Vogt-Knoedler did not report that amount as
gross income in 2007. On August 10, 2009, respondent issued to
petitioner a notice of deficiency which disallowed the claimed
alimony deduction in full, and petitioner petitioned the Court to
redetermine respondent’s determination.
Discussion
We must determine whether petitioner may deduct as alimony
any of the $12,000 which he paid to Ms. Vogt-Knoedler in 2007.2
2
Petitioner conceded in a posttrial memorandum which the
Court allowed petitioner to file in lieu of a legal brief that he
may not deduct as alimony $6,000 of the $12,000 paid to his
former wife in 2007. See Rule 151(a).
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Respondent argues that those payments are nondeductible child
support. Petitioner argues that half of those payments are
deductible as alimony. We agree with respondent.3
A taxpayer may generally deduct payments to a former spouse
where those payments are alimony includable in the gross income
of the former spouse. Sec. 215(a) and (b). For Federal income
tax purposes, however, alimony does not include payments fixed by
a divorce instrument that are payable for the support of the
children of the payor spouse. Sec. 71(c)(1). A payment is
treated as payable for the support of the children of the payor
spouse if the amount of the payment will be reduced on the
happening of a contingency specified in the divorce instrument
relating to a child, such as attaining a specified age, marrying,
dying, leaving school, or other similar contingencies. Sec.
71(c)(2)(A); see also sec. 1.71-1T(c), Q&A-17, Temporary Income
Tax Regs., 49 Fed. Reg. 34456 (Aug. 31, 1984).
Petitioner argues that the State court’s decision to
allocate the family support payment equally as child support and
spousal support is binding for Federal income tax purposes. We
disagree. It is well settled that the labels assigned to
payments by the parties or a divorce court are not determinative
for Federal income tax purposes. Beard v. Commissioner, 77 T.C.
3
Where, as here, the facts are not in dispute, we decide the
case without regard to the burden of proof or sec. 7491(a).
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1275, 1283-1284 (1981). Moreover, State court adjudications
retroactively redesignating payments as alimony and not child
support (or vice versa) are generally disregarded for Federal
income tax purposes. See Gordon v. Commissioner, 70 T.C. 525,
530 (1978). Thus, it is the express terms of the agreement which
dictate the Federal income tax consequences of the payments which
Mr. Knoedler made to his former spouse and not the subsequent
State court allocation.
The agreement contains an explicit contingency related to a
child; i.e., S.K.’s graduation from high school reduces
petitioner’s payment obligation from $2,000 per month to $1,000
per month per child in college. See sec. 1.71-1T(c), Q&A-16,
Temporary Income Tax Regs., supra. The existence of the
contingency triggers application of section 71(c)(1) and makes
petitioner’s 2007 payments to his former spouse child support not
deductible under section 215. See, e.g., Hammond v.
Commissioner, T.C. Memo. 1998-53; Fosberg v. Commissioner, T.C.
Memo. 1992-713. We conclude that petitioner may not deduct as
alimony any portion of the $12,000 that he paid to Ms. Vogt-
Knoedler in 2007.
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We have considered all arguments made in reaching our
decision, and to the extent not discussed, we conclude those
arguments to be moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.