T.C. Memo. 2015-80
UNITED STATES TAX COURT
DAVID IGLICKI AND LAURA J. STULTZ, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23542-12. Filed April 27, 2015.
William L. Henry and Louisa A. Schlieben, for petitioners.
Nancy C. Carver and Matthew A. Houtsma, for respondent.
MEMORANDUM OPINION
KERRIGAN, Judge: Respondent determined a deficiency of $10,479 and
an accuracy-related penalty of $2,096 with respect to petitioners’ Federal income
tax for tax year 2010.
-2-
[*2] Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the tax year at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. We round all monetary amounts to
the nearest dollar.
The issues for consideration are (1) whether petitioners are entitled to an
alimony deduction under section 215(a), and (2) whether petitioners are liable for
the accuracy-related penalty under section 6662(a).
Background
Some of the facts are stipulated and are so found. Petitioners are a married
couple who resided in Colorado when they filed their petition.
Petitioner husband was previously married to Ms. Christie Iglicki. They
were married on March 2, 1991, and they had one child. They signed a separation
agreement on April 1, 1999, in the State of Maryland.
The separation agreement required petitioner husband to pay $735 per
month in child support to Ms. Iglicki. The separation agreement did not require
petitioner husband to pay any spousal support to Ms. Iglicki unless he defaulted on
his obligations under the separation agreement. If petitioner husband did default,
he would become immediately liable for $1,000 per month in spousal support.
Petitioner husband’s obligation to pay spousal support would continue until one of
-3-
[*3] the following events occurred: (a) Ms. Iglicki died, (b) petitioner husband
died, or (c) petitioner husband made 36 payments. The Circuit Court for Harford
County, Maryland, entered a final divorce decree on June 22, 1999. The divorce
decree incorporated the separation agreement.
After the divorce petitioner husband moved to Colorado. He defaulted on
his obligations under the separation agreement and the divorce decree and began
incurring spousal support obligations as of November 1, 2002. In 2003 Ms.
Iglicki filed suit in the District Court of El Paso County, Colorado (El Paso district
court), to enforce the separation agreement and divorce decree. On August 12,
2008, Ms. Iglicki filed a verified entry of judgment with the El Paso district court,
declaring that petitioner husband owed her (1) $16,500 in past due child support,
plus $6,338 in interest, for a total of $22,838 in child support arrears and
(2) $36,000 in past due spousal support, plus $28,156 in interest, for a total of
$64,156 in spousal support arrears. Ms. Iglicki sought and obtained a writ of
garnishment against petitioner husband’s wages from the El Paso district court.
Petitioner husband paid off all child support arrears as of April 2009. On
September 9, 2009, petitioner husband and Ms. Iglicki agreed to an increase in
monthly child support from $735 to $938.
-4-
[*4] During 2010 petitioner husband made $50,606 in payments to Ms. Iglicki.
The payments, which were garnished from petitioner husband’s wages, included
$11,256 for child support.
Petitioners claimed a deduction for $39,350 of alimony payments on their
2010 tax return. Ms. Iglicki reported $13,441 of alimony income on her 2010 tax
return.
On June 18, 2012, respondent issued petitioners the notice of deficiency
disallowing the alimony deduction and determining the accuracy-related penalty.
Discussion
Generally, the Commissioner’s determinations in a notice of deficiency are
presumed correct, and a taxpayer bears the burden of proving those determinations
are incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioners did not contend that the burden of proof should be shifted to
respondent under section 7491(a), and the record does not suggest any basis for a
shift.
I. Alimony Payments
Section 215(a) provides that “[i]n the case of an individual, there shall be
allowed as a deduction an amount equal to the alimony or separate maintenance
-5-
[*5] payments paid during such individual’s taxable year.” Section 71(b)(1)
defines “alimony or separate maintenance payment” as 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 includable in gross income
under this section 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.
Respondent concedes that petitioner’s spousal support payments to Ms.
Iglicki meet the requirements of section 71(b)(1)(B) and (C) but argues that the
payments do not meet the requirements of section 71(b)(1)(A) and (D). These
requirements are in the conjunctive, and all must be met in order for a payment to
be treated as alimony.
Under section 71(b)(1)(D) the payor must have no liability to continue
payments after the payee’s death; otherwise the payor may not deduct the
payments. See Johanson v. Commissioner, 541 F.3d 973, 976-977 (9th Cir. 2008),
-6-
[*6] aff’g T.C. Memo. 2006-105. If the payor is liable for even one otherwise
qualifying payment after the payee’s death, none of the related payments required
before death will qualify as alimony. Sec. 1.71-1T(b), Q&A-10, Temporary
Income Tax Regs., 49 Fed. Reg. 34456 (Aug. 31, 1984). If the State court order is
silent as to the existence of a postdeath obligation, the requirements of section
71(b)(1)(D) may still be satisfied if the payments terminate upon the payee’s death
by operation of State law. Johanson v. Commissioner, 541 F.3d at 977.
Petitioner husband made the spousal support payments at issue pursuant to
the verified entry of judgment issued by the El Paso district court. The verified
entry of judgment is silent as to the existence of a postdeath obligation. Colorado
has enacted the Uniform Dissolution of Marriage Act (UDMA), Colo. Rev. Stat.
secs. 14-10-101 through 14-10-133 (2014). As enacted in Colorado, the UDMA
specifically authorizes the award of spousal maintenance. See id. sec. 14-10-114.
The term “maintenance” is defined to include the term “alimony”. Id. sec. 14-10-
103(1). A foreign judgment may be enforced in Colorado and has the same effect,
and is subject to the same procedures, defenses, and proceedings, as a Colorado
judgment. Id. sec. 13-53-103.
Colorado law treats payments made to satisfy future spousal support
obligations differently from payments made to satisfy spousal support arrears.
-7-
[*7] Future spousal support obligations terminate at the death of either spouse
unless otherwise agreed in writing or expressly provided in the decree. Id. sec. 14-
10-122(2)(a)(I); Miller v. Commissioner, T.C. Memo. 1999-273, slip op. at 10-11,
aff’d sub nom. Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002). By
contrast, an order enforcing spousal support arrears becomes a final money
judgment, and the applicable statute of limitations is the general 20-year statute
applicable to any other court order. Colo. Rev. Stat. sec. 14-10-122(1)(c); In re
Marriage of Nussbeck, 974 P.2d 493, 499 (Colo. 1999); Hauck v. Schuck, 353
P.2d 78, 80 (Colo. 1960). Since the verified entry of judgment was issued to assist
Ms. Iglicki in collecting past due but unpaid spousal support, it is treated as a final
money judgment against petitioner husband.
Under Colorado law “[w]hen a judgment is obtained in any court of record
in this state against any person who after the rendition of said judgment dies, a
claim based upon such judgment may be filed against the estate of the deceased
judgment debtor without first reviving the judgment against his heirs or personal
representatives.” Colo. Rev. Stat. sec. 13-58-101. In addition, “[t]he collection of
the judgments of courts of record shall not be delayed nor hindered by the death of
the plaintiff”, and the executor or administrator may be substituted for the
plaintiff. Id. sec. 13-58-103. Under Colorado law liability for payment of a final
-8-
[*8] money judgment is not affected by the death of either the payor or the payee.
Therefore, the spousal support payments fail to qualify as alimony under section
71(b)(1)(D) and petitioners are not entitled to an alimony deduction under section
215(a) for the payments.
II. Penalty
Respondent determined that petitioners are liable for an accuracy-related
penalty pursuant to section 6662(a) for the year at issue. Section 6662(a) imposes
a 20% penalty on any underpayment attributable to, among other things,
negligence or disregard of rules or regulations within the meaning of subsection
(b)(1) or any substantial understatement of income tax within the meaning of
subsection (b)(2). Only one accuracy-related penalty may be applied with respect
to any given portion of an underpayment, even if that portion is subject to the
penalty on more than one of the grounds set out in subsection (b). Sec. 1.6662-
2(c), Income Tax Regs.
The Commissioner bears the burden of production regarding the taxpayer’s
liability for any penalty. Sec. 7491(c); see also Higbee v. Commissioner, 116 T.C.
438, 446-447 (2001). Once the Commissioner has met this burden, the taxpayer
must provide persuasive evidence that the Commissioner’s determination was
incorrect. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 447.
-9-
[*9] Respondent can meet this burden by producing evidence that the
understatement of income tax is substantial as defined in section 6662(d)(1)(A).
See Janis v. Commissioner, T.C. Memo. 2004-117, slip op. at 28, aff’d, 461 F.3d
1080 (9th Cir. 2006), and aff’d, 469 F.3d 256 (2d Cir. 2006). The deficiency of
$10,479 here indicates that petitioners’ understatement exceeds $5,000, which is
greater than 10% of the income tax required to be shown on the tax return, $2,860,
for the taxable year. Respondent has met the burden of production.
The accuracy-related penalty does not apply with respect to any portion of
an underpayment for which it is shown that the taxpayer had reasonable cause and
acted in good faith. Sec. 6664(c)(1). Petitioners did not provide reasonable cause
for improperly deducting the alimony. Petitioners are liable for the accuracy-
related penalty.
Any contentions we have not addressed are irrelevant, moot, or meritless.
To reflect the foregoing,
Decision will be entered
for respondent.