Memorandum Findings of Fact and Opinion
WITHEY, Judge: The Commissioner has determined a deficiency in the income tax of petitioner in the amount of $1,243.25 for the year 1949 and $2,143.87 for 1950. The issue for our determination is whether the amounts of $4,700 and $5,300 paid to his wife in 1949 and 1950, respectively, in accordance with judgments of the United States District Court for the District of Columbia are deductible as alimony under section 23(u) of the Internal Revenue Code of 1939. Other issues raised by the pleading are not contested and will be adjusted under Rule 50.
Findings of Fact
All facts have been stipulated and are so found.
John B. Keleher, hereinafter referred to as the petitioner, filed Federal income tax returns for each of the years 1949 and 1950 with the collector of internal revenue for the district of Maryland.
Petitioner and Anna T. Keleher, hereinafter referred to as Anna, were married May 1, 1926. On March 26, 1947, Anna filed a "Complaint for Limited Divorce and/or Maintenance" against*274 the petitioner in the United States District Court for the District of Columbia, being Civil Action No. 1296-47. On April 15, 1947, the petitioner filed an answer and counterclaim in said action wherein he prayed for a divorce "a mensa et thoro." By judgment of the District Court, in Civil Action No. 1296-47, dated February 9, 1949, the complaint of Anna for a limited divorce was dismissed; the petitioner's motion to dismiss his cross-complaint for a limited divorce was granted and the petitioner was ordered to pay Anna maintenance in the sum of $100 per week commencing February 12, 1949.
In the course of that proceeding, the court filed its findings of fact and conclusions of law which are as follows:
"FINDINGS OF FACT
"1. The plaintiff, ANNA T. KELEHER, and the defendant, JOHN B. KELEHER, were married on May 1, 1926, at Baltimore, Maryland, and no issue has been born of said marriage.
"2. Said parties lived together until about January 25, 1946 when, upon the promise of the plaintiff that she would join him within a few days for a vacation in Miami, Florida, the defendant went to Miami upon said assurance and shortly after he left Washington the plaintiff removed from safety*275 deposit boxes in the joint names of both parties, in the District of Columbia, all of the money therein, which she testified was between $30,000 and $32,000, approximately $15,000 in one box and approximately $17,000 in the other. The defendant testified that the amount of money withdrawn from said boxes totalled $80,000, consisting of $60,000 in one box and $20,000 in the other, and the Court finds that said money belonged to the defendant and that the actual amount removed was considerably in excess of the amount admitted by plaintiff and was at least twice the amount so admitted by her, and that her endeavor to prove that such funds have been completely expended or lost by her is not acceptable to the Court.
"3. That upon defendant's return from Florida he was informed by plaintiff that she had changed the door locks on their apartment and that he need not come home. Later the defendant discovered that the plaintiff had removed the funds from the safety deposit boxes. The defendant made efforts for a reconciliation, conditioned on plaintiff's accounting for the funds she had extracted from the safety deposit boxes but plaintiff refused to account for said funds, or even to admit*276 taking them, and the defendant accordingly discontinued living with her. From these facts, the Court finds that plaintiff was more interested in retaining the money she had taken than in effecting a reconciliation with the defendant and that, as a result of her aforesaid conduct, the plaintiff and defendant separated on or about March 1, 1946, since which time said parties have not resided together.
"4. That the plaintiff's allegations of cruelty on the part of the defendant prior to the filing of the Complaint herein have not been sustained, and the proof does not sustain a charge of adultery.
"5. That inasmuch as plaintiff remains the wife of the defendant, it is incumbent on him to maintain her and the Court finds that $100.00 per week is a reasonable and proper amount for her separate maintenance.
"6. That the defendant having requested, upon motion by his counsel at the conclusion of plaintiff's case, permission to dismiss without prejudice his cross-claim for a limited divorce for cruelty, so that he might now proceed to file an action for absolute divorce, the Court grants leave to defendant to dismiss his said cross-claim herein without prejudice to his rights.
"7. *277 That in accordance with the practice requiring the husband to pay legal fees incurred by the wife in domestic litigation, the Court finds that reasonable compensation to plaintiff's present attorney, James J. Laughlin, Esq., is the sum of $2,000.00, and that reasonable compensation to plaintiff's former attorney herein, Roy St. Lewis, Esq., is the sum of $1,500.00; which amounts said defendant should be required to pay, together with the taxable costs of this proceeding, excluding any docket fee to counsel as part of said costs.
"CONCLUSIONS OF LAW
"1. The plaintiff's conduct in appropriating defendant's funds to her own use, in locking him out of their home, refusing to return his funds and effect a reconciliation, was not justified.
"2. The charges in her Complaint of cruelty on the part of the defendant have not been sustained, nor does the evidence sustain any other grounds for divorce on the part of the plaintiff, and her Complaint herein must accordingly be dismissed.
"3. The defendant's motion for leave to dismiss his cross-claim for limited divorce is a proper request and said cross-claim will be entered dismissed upon defendant's motion and without prejudice.
"4. *278 The defendant, as the husband of plaintiff; should be required to pay her $100.00 per week as separate maintenance, together with counsel fees payable in the amounts and to her respective attorneys as recited in the foregoing Findings of Fact, together with taxable Court costs, excluding docket fee to her attorneys.
"Accordingly, the Court will enter a judgment in accordance with the foregoing Findings and Conclusions.
"/s/ EDWARD A. TAMM / Judge
"February 9, 1949."
On January 15, 1949, Anna filed a second complaint against the petitioner in the same District Court for a limited divorce, Civil Action No. 197-49, which was amended on March 24, 1949. On January 17, 1949, the petitioner filed a complaint against Anna in the District Court for an absolute divorce, Civil Action No. 204-49. Both of the cases were consolidated for trial. In separate judgments, dated March 10, 1950, the District Court dismissed Civil Action No. 197-49 and granted petitioner a decree of absolute divorce not to be "effective until the expiration of the time allowed for taking an appeal, nor until the final disposition of any appeal taken and, in no event, until the expiration of six months after this*279 date."
The District Court's judgment of March 10, 1950, in Civil Action No. 204-49, ordered petitioner to pay Anna
"as permanent alimony, the lump sum of Sixty Thousand ($60,000) Dollars in lieu of and in release of all her claims and rights against said plaintiff and his estate; provided however, that said lump sum payment shall not be made until the expiration of six months after this date or, if an appeal is taken from this judgment, until the disposition of such appeal; and, provided further, that pending the expiration of said period of six months or pending the disposition of any appeal so taken, the defendant shall pay to the plaintiff the sum of One Hundred ($100.00) Dollars per week, the first payment to be due and payable on the 11th day of March, 1950, for the week beginning on said date, and the aggregate of such weekly payments shall be deducted from said lump sum amount of Sixty Thousand (.60,000.00) Dollars and only the difference shall be payable to the defendant upon the expiration of said period of six months or upon the disposition of any such appeal, whichever shall later occur." * * *
The judgments of the District Court in Civil Action No. 197-49 and Civil*280 Action No. 204-49 were appealed to the United States Court of Appeals for the District of Columbia. The opinion of the United States Court of Appeals for the District of Columbia in these cases, decided July 5, 1951, is reported in Keleher v. Keleher, 192 Fed. (2d) 601, 89 U.S. App. D.C. 266">89 U.S. App. D.C. 266, certiorari denied 343 U.S. 943">343 U.S. 943 (May 5, 1952).
The District Court in Civil Action No. 204-49 rendered its "Judgment on Remand" on February 20, 1953.
Subsequent to the judgment in Civil Action 1296-47, the petitioner paid Anna the sum of $4,700 during the year 1949. During the year 1950, the petitioner paid Anna the sum of $5,300, $900 of which was paid prior to March 10, 1950. The petitioner was informed by the report of the Internal Revenue Agent, dated October 22, 1951, that the deductions here in question were disallowed. The petitioner filed a protest to the action of the Internal Revenue Agent on January 7, 1952.
Opinion
The issue for our decision depends upon (1) whether or not the judgment of the District Court, dated February 9, 1949, provided for the payment by petitioner to his wife of periodic payments under a decree of "separate maintenance" within*281 the meaning of that term as it is employed in section 22(k) of the Internal Revenue Code of 1939 and (2) whether a judgment of the District Court rendered on March 10, 1950, granting petitioner an absolute divorce provided for the payment by him to his wife of installment payments to discharge a part of a principal lump sum, as contended by respondent, or, as petitioner contends, such payments were alimony within the meaning of section 22(k) and deductible as such under section 23(u).
Determination of the first question depends upon whether the first judgment here involved was a decree of "separate maintenance" under section 22(k), for, unless amounts paid under that judgment are includible in the income of Anna, they may not be deducted under section 23(u). Such payments were periodic payments and were designated in the District Court's judgment as separate maintenance but this is insufficient to render them includible in the income of Anna. In order that periodic payments of separate maintenance be includible in the income of a wife and deductible from that of the husband, they must be imposed upon the husband by virtue of a decree of separate maintenance which has the legal effect*282 of sanctioning or legitimizing the living apart of a husband and wife. Frank J. Kalchthaler, 7 T.C. 625">7 T.C. 625; Charles L. Brown, 7 T.C. 715">7 T.C. 715. Clearly the judgment of Gebruary 9, 1949, which was a final judgment not appealed from, expressly denied Anna's application for the only relief she had prayed for, which, if granted, would have rendered the payments here involved deductible from the income of petitioner as periodic payments made under a decree of separate maintenance. That relief, denied by the court, was for a limited divorce a mensa et thoro. The latter term is synonymous with the term "legal separation." Maschaur v. Maschaur, 23 App. D.C. 87">23 App. D.C. 87. The relief prayed for by Anna, granted by the court on the basis of which grant petitioner here seeks a deduction, was for support money even though the separation of the parties was not sanctioned by a decree or judgment of limited divorce. It is clear to us that such decrees merely enforce the family obligation of support on the part of the husband arising through the marital relationship where a separation or desertion has taken place in fact and not where the right to separation has been determined*283 by a judgment or decree. Thus viewed the instant payments have the same character under section 22(k) as payments made under orders arising through quasi-criminal actions for non-support and desertion.
Petitioner contends that we are bound by the "Judgment on Remand" of the District Court, entered February 20, 1953, insofar as it is there determined "That said parties were legally separated by decree entered herein February 9, 1949 in Civil Action 1296-47." We are not in accord with this contention because the "Judgment on Remand" had not been entered by the close of either year at issue here. Tax liabilities are to be determined on the basis of an annual accounting and we are for that reason limited in our consideration of the issue here presented to the District Court's judgments or decrees which were in force at the close of each of the years at issue. Clearly the retroactive effect of the latter judgment upon first decree, if any, can not bind us in our interpretation of the Internal Revenue Code. The language of the Court of Appeals for the Second Circuit in affirming (168 Fed. (2d) 449) the decision of this Court in Robert L. Daine, 9 T.C. 47">9 T.C. 47, with*284 respect to state court decisions has equal applicability with respect to decisions of the District Court of the District of Columbia in divorce cases.
"Although such a decision of the state court may bind the parties in the settlement of their legal rights between themselves, yet the determination of tax consequences is not to be so resolved. The decision of a state court might well turn on elements of estoppel, laches, acceptance of benefits, rights of third parties, and other incidents of a decisive nature as to them, but in no proper sense to be held prejudicial to the federal revenue. Hence it is clear that the retroactive judgments of state courts do not determine the rights of the Federal Government under its tax laws. * * *" [Daine v. Commissioner, 168 Fed. (2d) 449, 451.]
It is held that amounts paid Anna by petitioner in both years here involved under the District Court's judgment of February 9, 1949, are not deductible under section 23(u).
With respect to amounts sought to be deducted which were paid under the decree of March 10, 1950, petitioner makes no contention that the decision of the Court of Appeals for the District of Columbia in Keleher v. Keleher, supra,*285 or the Judgment on Remand of the District Court of the District of Columbia, entered in accordance therewith, have any bearing. For reasons above referred to we are in accord. Deductibility of those payments are to be determined on the basis of that judgment alone.
It seems obvious to us that deduction of payments made under the March 10, 1950, judgment is expressly prohibited by section 22(k), for it is there clearly provided that "Installment payments discharging a part of an obligation the principal sum of which is, in terms of money or property, specified in the decree or instrument shall not be considered periodic payments for the purposes of this subsection." The court had made a division of petitioner's property in granting him a divorce. It was this division by the District Court of petitioner's property without a finding of an element of ownership therein on the part of Anna which the Court of Appeals in Keleher v. Keleher, supra, held to be erroneous. The weekly payments were decreed to be due Anna in order to effectuate the division of property. They were to apply, at the expiration of the six months' interlocutory period of the divorce judgment, upon the*286 total sum of $60,000, which was found by the court to be the remaining and unpaid portion of Anna's share of petitioner's property. It necessarily follows that such payments were not deductible from the income of petitioner under section 23(u).
Because of certain uncontested adjustments
Decision will be entered under Rule 50.