T.C. Memo. 2011-266
UNITED STATES TAX COURT
ANDREW DEAN SHELTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14981-09. Filed November 10, 2011.
Andrew Dean Shelton, pro se.
James A. Kutten, for respondent.
MEMORANDUM OPINION
FOLEY, Judge: The issues for decision, relating to
petitioner’s 2007 Federal income tax return, are whether
petitioner is entitled to an alimony deduction and whether
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petitioner is liable for a section 6662(a)1 accuracy-related
penalty. The parties submitted this case fully stipulated
pursuant to Rule 122.
Background
Petitioner married Valerie R. Shelton in 2003. On November
23, 2007, petitioner and Ms. Shelton entered into a marital
settlement agreement (settlement agreement), which provided
mutually agreed-upon terms for their divorce. The settlement
agreement required petitioner to pay Ms. Shelton $25,000
“representing her share of his separation pay from the military,
in addition to any interest she claims in the real estate and
furniture still in the marital home.” The settlement agreement
further stated that the payment “constitutes full and final
settlement of any additional claims to a share of assets” and
that each party waived any claim for maintenance from the other
party.
On November 29, 2007, the Circuit Court for the Twentieth
Judicial Circuit in St. Clair County, Illinois, entered a
judgment of dissolution of marriage (divorce decree) terminating
petitioner’s and Ms. Shelton’s marriage. The divorce decree
1
Unless otherwise indicated, all section references 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.
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stated that each party was barred from asserting any claim “for
maintenance, formerly known as alimony,” and it incorporated by
reference the terms of the settlement agreement.
In December 2007, petitioner paid Ms. Shelton $25,000 (the
payment).2 In April 2008, petitioner filed a Federal income tax
return relating to 2007 and deducted, as alimony, $25,000. In a
statutory notice of deficiency dated March 20, 2009, and relating
to 2007, respondent determined petitioner was not entitled to the
alimony deduction and was liable for a section 6662(a) accuracy-
related penalty. On June 19, 2009, petitioner, while residing in
Illinois, filed his petition with the Court.
Discussion
Petitioner contends that the payment is alimony and is,
therefore, deductible. Respondent contends that none of the
payment is deductible because it does not qualify as alimony and
is instead a division of marital property.
An individual may generally deduct payments made during the
taxable year to the extent that those payments are alimony or
separate maintenance includable in the recipient’s gross income.
See sec. 215(a) and (b). Section 71(a) requires amounts received
as alimony to be included in gross income.
2
Petitioner paid Ms. Shelton $24,000 by wire transfer on
Dec. 5, 2007, and $1,000 by check dated Dec. 6, 2007.
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In order to qualify as alimony, the payment must meet the
requirements of section 71(b)(1)(A) through (D). Because the
payment does not meet the requirements of section 71(b)(1)(B), we
need not address whether it meets the other requirements.
Section 71(b)(1)(B) requires that the divorce instrument “not
designate such payment as a payment which is not includible in
gross income under this section and not allowable as a deduction
under section 215”. The divorce decree provides clear, explicit,
and express direction that neither party shall receive alimony or
a separate maintenance payment. See Estate of Goldman v.
Commissioner, 112 T.C. 317, 323 (1999), affd. without published
opinion sub nom. Schutter v. Commissioner, 242 F.3d 390 (10th
Cir. 2000). Accordingly, the payment does not meet the
requirements of section 71(b)(1)(B), and thus petitioner is not
entitled to a deduction pursuant to section 215.3
Respondent further determined that petitioner is liable for
a section 6662(a) accuracy-related penalty relating to 2007.
Section 6662(a) and (b)(1) imposes a 20-percent penalty on the
amount of any underpayment of tax attributable to negligence or
3
Pursuant to sec. 7491(a), petitioner has the burden of
proof unless he introduces credible evidence relating to the
issue that would shift the burden to respondent. See Rule
142(a). Our conclusions, however, are based on a preponderance
of the evidence, and thus the allocation of the burden of proof
is immaterial. See Martin Ice Cream Co. v. Commissioner, 110
T.C. 189, 210 n.16 (1998).
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disregard of rules or regulations. Respondent bears, and has
met, the burden of production relating to this penalty. See sec.
7491(c); Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Moreover, petitioner did not act with reasonable cause and in
good faith. The divorce decree explicitly stated that neither
party was entitled to alimony, yet petitioner proceeded to claim
an alimony deduction. Accordingly, we sustain respondent’s
determination.
Contentions we have not addressed are irrelevant, moot, or
meritless.
To reflect the foregoing,
Decision will be entered
for respondent.