T.C. Summary Opinion 2017-3
UNITED STATES TAX COURT
MARK A. QUINTAL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25999-15S. Filed February 2, 2017.
Gregory Jon Koldys, for petitioner.
Janet F. Appel and Derek W. Kelley, for respondent.
SUMMARY OPINION
GUY, 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
1
Unless otherwise indicated, section references are to the Internal Revenue
(continued...)
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any other court, and this opinion shall not be treated as precedent for any other
case.
Respondent determined that petitioner is liable for a Federal income tax
deficiency of $15,210 and an accuracy-related penalty under section 6662(a) of
$3,042 for each of the taxable years 2011, 2012, and 2013 (years in issue).
Petitioner filed a timely petition for redetermination with the Court pursuant to
section 6213(a). At the time the petition was filed, petitioner resided in
Massachusetts.
This case is before the Court on respondent’s motion for summary
judgment, with a supporting declaration, filed pursuant to Rule 121. Petitioner
filed an opposition to motion for summary judgment, a memorandum of law, and a
first amendment to memorandum of law. The parties agree that there is no dispute
as to any material fact relevant to the disposition of this matter. The sole question
to be decided is whether payments that petitioner made to Ms. Gramlich-Quintal
during the years in issue constitute alimony as defined in section 71(b) that he is
entitled to deduct pursuant to section 215.
1
(...continued)
Code, as amended and in effect for 2011, 2012, and 2013, and Rule references are
to the Tax Court Rules of Practice and Procedure. Monetary amounts are rounded
to the nearest dollar.
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Background2
Petitioner and Ms. Gramlich-Quintal married on August 1, 1992, and they
had three children. They later separated and divorced in 2010.
I. Separation and Property Settlement Agreement
On October 29, 2009, petitioner and Ms. Gramlich-Quintal executed a
separation and property settlement agreement (separation agreement), which
included exhibits A through M which were incorporated in the separation
agreement by reference. The separation agreement stated that Ms. Gramlich-
Quintal was awarded physical custody of the three children and that the parties
intended that the separation agreement resolve all matters between them, including
past, present, and future alimony and support and maintenance (citing Mass. Ann.
Laws ch. 208, secs. 28 and 34 (LexisNexis 2011), which refer to child and spousal
support, respectively). The separation agreement further stated that the children
“are still principally dependent upon the parties for support and entitled to support
pursuant to provisions of MGL, Ch. 208, Sect. 28.”
Before the separation agreement was executed, petitioner and Ms.
Gramlich-Quintal engaged in last-minute negotiations, and several of the exhibits
2
The following background facts are not in dispute and are drawn from the
pleadings and other documents making up the record in this case.
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were substantially revised. In some instances, entire paragraphs of an exhibit were
lined through and replaced with handwritten statements.
Exhibit A stated in relevant part that petitioner would maintain his current
health insurance coverage or its equivalent for the benefit of his children as long
as each child was “unemancipated as that term is defined herein.” Exhibit A did
not include a definition of the term “unemancipated”.
Exhibit B, originally titled “ALIMONY”, was revised to read “Unallocated
Support”. Exhibit B stated in part that petitioner would “pay to * * * [Ms.
Gramlich-Quintal] the sum of $900.00 per week commencing forthwith by
implemented wage assignment. (See Exhibit J)” and that “[a]ny alimony payments
shall terminate” upon the earlier of the death of petitioner or Ms. Gramlich-
Quintal or the latter’s remarriage. Exhibit B further stated that the parties
“acknowledge that husband anticipates that the above payment is deductible to
him and includable to wife”.
Exhibit J was titled “CUSTODY, SUPPORT, VISITATION”. Although
exhibit J originally referred to petitioner’s obligation to make child support
payments, that statement was lined through and was replaced with the phrase “See
Exhibit B implemented wage assignment forthwith.” Exhibit J included a
statement acknowledging that, as a result of disabilities, two of the couple’s
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children might never become self-sufficient or emancipated and defined the term
“emancipation” of the minor children generally as occurring on the child’s death,
marriage, entering into military service, or graduation from high school or a four-
year college program.
Exhibit J further stated:
Support as to the child as termed in this agreement shall end upon
emancipation.
In accordance with Section 71(b)(1)(B) of the Code, the Husband and
Wife expressly agree to designate and hereby do designate all
payments required in this Exhibit as excludable and non-deductible
payments for purposes of Sections 71 and 215 of the Code,
respectively.
It is expressly agreed and understood that the payments made by the
Husband to the Wife for support under this Article shall terminate
upon his death and shall not constitute a charge upon his estate in that
there are to be life insurance trusts established to provide for the
needs of the children.
The remainder of exhibit J established the terms for custody of and visitation with
the children.
The Probate and Family Court of Massachusetts (family court) entered a
Judgment of Divorce Nisi which incorporated the separation agreement and
terminated the couple’s marriage effective January 28, 2010.
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On October 22, 2014, the family court filed a stipulation for judgment in
response to Ms. Gramlich-Quintal’s complaint for modification and petitioner’s
counterclaim. The stipulation for judgment, which was incorporated into the final
judgment, stated in relevant part: “That the Father pay to the Mother $900 per
week as child support for the parties’ three children.”
II. Petitioner’s Income Tax Returns
Petitioner filed Federal income tax returns for the taxable years 2011, 2012,
and 2013, and on each return he claimed a deduction of $46,800 for alimony paid
to Ms. Gramlich-Quintal. Ms. Gramlich-Quintal, however, did not report the
payments as income on her tax returns.
Discussion
Summary judgment is intended to expedite litigation and avoid unnecessary
and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).
Summary judgment may be granted with respect to all or any part of the legal
issues in controversy “if the pleadings, answers to interrogatories, depositions,
admissions, and any other acceptable materials, together with the affidavits * * * ,
if any, show that there is no genuine dispute as to any material fact and that a
decision may be rendered as a matter of law.” Rule 121(b).
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Section 71(a) provides the general rule that gross income includes amounts
received as alimony or separate maintenance payments. Section 215(a) allows a
deduction to the payor for an amount equal to the alimony paid during the taxable
year to the extent it is includable in the recipient spouse’s gross income under
section 71(a).
Whether a payment constitutes alimony is determined by reference to
section 71(b)(1), which defines “alimony” as any cash payment if (A) the payment
is received by 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 section 71 and not allowable as a deduction
under section 215, (C) the payor and payee spouses are not members of the same
household when the payment is made, and (D) the payment obligation terminates
at the death of the payee spouse and there is no liability to make either a cash or a
property payment as a substitute for the payment after the death of the payee
spouse.
Section 71(c)(1) provides the general rule that subsection (a) shall not apply
to that part of any payment which the terms of the divorce or separation instrument
fix (in terms of an amount of money or a part of the payment) as a sum which is
payable for the support of children of the payor spouse. Under section 71(c)(2),
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however, if any amount specified in the divorce instrument “will be reduced” on
the happening of a contingency specified in the instrument that relates to a child of
the payor spouse, then an amount equal to the amount that “will be reduced” is
treated as fixed as a sum payable for the support of the children of the payor
spouse. Events that relate to a child of the payor spouse include the child’s
attaining a specified age or income level, dying, marrying, leaving school, leaving
the payee spouse’s household, or gaining employment. Sec. 71(c)(2)(A).
Respondent concedes that petitioner’s support payments to Ms. Gramlich-
Quintal satisfy the requirements of subparagraphs (A), (C), and (D) of section
71(b)(1). Respondent contends, however, that petitioner’s payments do not
constitute alimony because, contrary to subparagraph (B) of section 71(b)(1),
exhibit J (incorporated by reference in the separation agreement) states: “In
accordance with Section 71(b)(1)(B) of the Code, the Husband and Wife expressly
agree to designate and hereby do designate all payments required in this Exhibit as
excludable and non-deductible payments for purposes of Sections 71 and 215 of
the Code, respectively.”
In the alternative, respondent again points to exhibit J and maintains that,
because the unallocated support payments are subject to contingencies involving
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petitioner’s children, they are considered payments made for the support of
petitioner’s children in accordance with section 71(c)(2).
Petitioner relies on exhibit B of the separation agreement, which expressly
provides for “unallocated support” payments, as opposed to alimony or child
support payments. Noting that exhibit J does not expressly require any form of
payment, petitioner avers that the statement in exhibit J that respondent relies upon
is not relevant to the question whether the disputed payments constitute alimony.
Petitioner further asserts that the parties’ last-minute negotiations and revisions to
the separation agreement were intended to ensure that the disputed payments
would be treated as alimony for purposes of sections 71 and 215.
As an initial matter, we reject petitioner’s contention that we should
evaluate his and Ms. Gramlich-Quintal’s intent regarding the characterization of
the disputed payments. As we have explained in the past: “Congress eliminated
any consideration of intent in determining the deductibility of a payment as
alimony in favor of a more straightforward, objective test that rests entirely on the
fulfillment of explicit requirements set forth in section 71.” See Okerson v.
Commissioner, 123 T.C. 258, 264-265 (2004) (citing Hoover v. Commissioner,
102 F.3d 842, 844-845 (6th Cir. 1996), aff’g T.C. Memo. 1995-183).
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Under the circumstances, we focus on the requirement in section
71(b)(1)(B) that the settlement agreement not state that the payment is neither
includible in gross income nor allowable as a deduction. We acknowledge, as
petitioner contends, that exhibit J does not expressly require any payment or
otherwise fix an amount to be paid as alimony or child support. Petitioner’s
narrow focus on this aspect of exhibit J, however, gives no effect to the
cross-references in exhibits B and J. As we see it, a proper consideration of the
separation agreement requires a construction of the document as a whole,
including the exhibits and the cross-references within the exhibits. “Where a
separation agreement sets the parties’ support obligations, the language of the
contract, if plain and unambiguous, must be construed in accordance with its
ordinary and usual sense.” Shaw v. Turcotte, 922 N.E.2d 179, 2010 WL 565388,
at *2 (Mass. App. Ct. 2010) (quoting Larson v. Larson, 28 Mass. App. Ct. 338,
340 (1990)).
Reading the separation agreement as a whole, we conclude that exhibits B
and J must be read in tandem and that the unallocated support payments prescribed
in exhibit B are subject to the provisions of both that exhibit and exhibit J. In this
regard, the handwritten revisions to the settlement agreement were poorly
conceived. Specifically, although exhibit B was revised to state that the parties
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“acknowledge that husband anticipates that the above [unallocated support]
payment is deductible to him and includable to wife” (emphasis added), exhibit J
states more definitively: “In accordance with Section 71(b)(1)(B) of the Code, the
Husband and Wife expressly agree to designate and hereby do designate all
payments required in this Exhibit as excludable and non-deductible payments for
purposes of Sections 71 and 215 of the Code, respectively.” We conclude that the
latter, more definitive statement controls in this case. Because the settlement
agreement provides that the unallocated support payments are excludable from
income and not allowable as deductions, it follows that the payments do not satisfy
the definition of alimony under section 71(b)(1)(B). Accordingly, we conclude
that respondent is entitled to judgment as a matter of law sustaining the
determinations set forth in the notice of deficiency.3
To reflect the foregoing,
An appropriate order and decision
will be entered.
3
Under the circumstances, we need not consider respondent’s alternative
argument that the unallocated support payments constitute child support payments
under sec. 71(c)(2).