T.C. Summary Opinion 2012-64
UNITED STATES TAX COURT
EMMANUEL CHARLES KOUSKOUTIS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 496-11S. Filed July 9, 2012.
Emmanuel Charles Kouskoutis, pro se.
Jeffrey A. Schlei, for respondent.
SUMMARY OPINION
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
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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.
Respondent determined a deficiency in petitioner’s 2008 Federal income tax
of $12,534 and an accuracy-related penalty under section 6662(a) of $2,507.2 The
deficiency stems from the disallowance of a deduction for alimony paid. After a
concession by respondent, the sole issue for decision is whether petitioner is entitled
to deduct $44,700 as alimony paid to his former spouse in 2008.3
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 California when the petition was filed.
In June 1992 petitioner married his former spouse, and he had two children
with her during their marriage.
1
Unless otherwise indicated, all subsequent 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.
2
All dollar amounts are rounded to the nearest dollar.
3
Respondent concedes the accuracy-related penalty under sec. 6662(a).
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In January 2008 petitioner and his former spouse separated. Petitioner
remained in the family home, and his former spouse moved into a separate
residence. Petitioner and his former spouse maintained separate residences
throughout the year in issue.
On January 12, 2008, the District Court for Arapahoe County, Colorado,
(State court) issued Temporary Orders (nunc pro tunc November 13, 2007), in
petitioner’s divorce case. The Temporary Orders incorporated stipulations from
petitioner and his former spouse. Paragraph 8 of the Temporary Orders provided:
8. Once * * * [petitioner’s former spouse] moves from the
marital residence, * * * [petitioner] shall pay * * * [petitioner’s former
spouse] unallocated family support in the amount of $3725.00 per
month * * * . * * * [Petitioner’s former spouse] shall not be required to
report such payments as income on her tax return. [Emphasis added.].
The Temporary Orders did not specify what portion of the “unallocated family
support” payments constituted child support for their two minor children.
The State court subsequently issued Permanent Orders (nunc pro tunc May 1,
2009), and ordered, inter alia, the dissolution of petitioner’s marriage to his former
spouse.
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On his 2008 Federal income tax return petitioner claimed an alimony
deduction of $44,700 for payments he made to his former spouse in 2008 pursuant
to the Temporary Orders.
In a notice of deficiency respondent determined that the $44,700 paid by
petitioner was not alimony and, therefore, disallowed the claimed deduction in full.
Discussion4
Section 71(a) provides the general rule that alimony or separate maintenance
payments received are included in the recipient’s gross income. Section 215(a)
provides the complementary general rule that alimony or separate maintenance
payments are tax deductible by the payor in the taxable year paid.
Section 215(b) defines the term “alimony or separate maintenance payment”
by reference to section 71(b), the relevant provision of which 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,
4
The issue for decision under these facts is essentially legal in nature;
therefore, we decide this case without regard to the burden of proof.
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(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.
Unallocated family support payments are deductible as alimony or separate
maintenance only if all four of the above conjunctive requirements of section
71(b)(1) are met. See Miller v. Commissioner, T.C. Memo. 1999-273, aff’d sub
nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002); see also Johnson
v. Commissioner, T.C. Memo. 2006-116.
Both parties agree that the unallocated family support payments made by
petitioner to his former spouse in 2008 (disputed payments) satisfy the requirements
set out in subparagraphs (A), (C), and (D) of section 71(b)(1). The parties disagree,
however, as to whether the requirement of section 71(b)(1)(B) has been met. In
other words, the parties disagree as to whether the Temporary Orders contain what
is commonly referred to as a nonalimony designation.
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Under subparagraph (B) of section 71(b)(1), a payment is treated as
nonalimony if the divorce or separation instrument designates the payment as such.
The divorce or separation instrument need not mimic the language of section
71(b)(1)(B) for a nonalimony designation to exist. Estate of Goldman v.
Commissioner, 112 T.C. 317, 323 (1999), aff’d without published opinion sub nom.
Schutter v. Commissioner, 242 F.3d 390 (10th Cir. 2000). Rather, a nonalimony
designation exists if “the substance of such a designation is reflected in the
instrument.” Id.
The term “designate” as used in section 71(b)(1)(B) means “to make known
directly”. Richardson v. Commissioner, 125 F.3d 551, 556 (7th Cir. 1997), aff’g
T.C. Memo. 1995-554. In that regard, “[f]or a legal instrument to make known
directly that a spouse’s payments are not to be treated as income * * * the
instrument must contain a clear, explicit and express direction to that effect.” Id. In
Richardson v. Commissioner, T.C. Memo. 1995-554, we held that “[b]ecause the *
* * [divorce] court did not expressly designate the court-ordered payments as
payments which were not includable in * * * [the taxpayer’s] income, the
requirements of sections 71 and 215” were met and the taxpayer’s payments
constituted alimony.
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In the instant case, however, paragraph 8 of the Temporary Orders contains a
clear, explicit, and express direction that the disputed payments are not to be
includible in the income of petitioner’s former spouse. Although the language does
not precisely mimic the language of section 71(b)(1)(B), we hold that the substance
of a nonalimony designation is reflected in the Temporary Orders. Consequently,
the disputed payments do not meet all four of the conjunctive requirements provided
by section 71(b)(1) and thus do not constitute alimony or separate maintenance
payments deductible under section 215(a).5
5
Petitioner alleges that his former spouse used some of the disputed
payments she received to pay her personal expenses (e.g., car payments, house
payments, credit card payments, etc.) and requests that we divide the disputed
payments into alimony and child support using State child support guidelines. We
understand petitioner’s argument; however, the Court must apply the law as written.
A payment can be treated as alimony only when the objective test under sec.
71(b)(1) is satisfied regardless of what the recipient does with the payment once
received.
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Conclusion
We have considered all of the arguments advanced by petitioner, and, to the
extent not expressly addressed, we conclude that those arguments do not support a
result contrary to our decision herein.
To give effect to our disposition of the disputed issue as well as respondent’s
concession,
Decision will be entered
for respondent as to the deficiency in
tax and for petitioner as to the
accuracy-related penalty under
section 6662(a).