*124 Decision will be entered for the respondent.
Petitioner and Idy Hollander were divorced in June 1946. Two months prior thereto, they entered into an agreement of permanent and final settlement with regard to their property and obligations for support and maintenance which each had or owed to the other, and this agreement was "ratified, confirmed and approved" in the decree of divorce. Under the agreement, Idy was to receive alimony payments for the remainder of her life or until her remarriage, and in the latter event, the payments were to cease automatically. In 1948, Idy advised petitioner that she desired to remarry. The man she desired to marry was "relatively impecunious," and "in order to enable" her to remarry, petitioner entered into a new agreement with her, whereunder, notwithstanding the limitations of the first agreement, petitioner agreed to make specified monthly payments to Idy subsequent to her remarriage. Idy was married within 2 weeks of the execution of the latter agreement. Held, that the payments made to Idy subsequent to her remarriage were not made under a written agreement incident to the divorce of petitioner and Idy, within the meaning of section*125 22 (k) of the Internal Revenue Code of 1939, but under an agreement incident to Idy's remarriage, and that the said payments are not, therefore, deductible by petitioners under section 23 (u) of the Code.
*827 Respondent determined deficiencies in income tax against petitioners for the taxable years 1948 and 1949 in the respective amounts of $ 6,866.59 and $ 3,947.58. The question is whether certain payments made by Hans S. Hollander in 1948 and 1949 to his former wife are deductible by him and his present wife under section 23 (u) of the Internal Revenue Code of 1939. No witnesses being called, the proceeding herein was submitted on certain documentary evidence and facts stipulated by the parties.
FINDINGS OF FACT.
The facts*126 which were stipulated are found as stipulated.
Petitioners are and have been since August 5, 1948, husband and *828 wife. They filed their income tax returns for the years 1948 and 1949 with the collector of internal revenue for the first district of California.
Hans S. Hollander, sometimes referred to as petitioner, was married to Idy Hollander on September 30, 1937. One child, Barbara Mia Hollander, was born of the marriage, on August 12, 1940.
On March 6, 1946, in contemplation of divorce, an agreement was entered into by and between the petitioner and Idy Hollander, which agreement was declared to be a permanent and final settlement of property or property rights and obligations for support "which each has or may have or owe to the other or to the minor child." Under the terms of the agreement petitioner agreed to make certain payments for the support and maintenance of Idy Hollander. The agreement was in part as follows:
PROPERTY SETTLEMENT AGREEMENT
This Agreement, made and entered into in the City of Los Angeles, County of Los Angeles, State of California, this 6 day of March, 1946, by and between IDY HOLLANDER, hereinafter for convenience referred to as the "wife", *127 and HANS S. HOLLANDER, hereinafter for convenience referred to as the "husband",
Witnesseth:
The husband and wife represent:
* * * *
(e) That they desire to make, on a fair and equitable basis, a permanent and final settlement and adjustment between themselves with regard to their assets, property and property rights and obligations for support and maintenance which each has or may have or owe to the other or to the minor child;
* * * *
2. Upon entry of a valid interlocutory decree of divorce or decree of separate maintenance, the husband agrees to pay to the wife from and after the entry of said decree and in lieu of the payments referred to in paragraph 1 hereof, an amount equivalent to $ 10,000.00 per year, payable at the rate of one-twelfth (1/12) of said amount per month, for alimony, support, maintenance and care of the wife and child; provided, however, that if the amount so payable is greater than one-third (1/3) of the income received by the husband for the year concerned, then said yearly amount shall be reduced to an amount equivalent to said one-third (1/3) of said income so received by the husband, which lesser sum shall likewise be payable one-twelfth (1/12) thereof *128 for each month during the year concerned. If by reason of the income of the husband, the husband has over-paid the wife, then an adjustment shall be made to effect the correct amount payable, and for this purpose the husband shall have the right to withhold payments, or portions thereof, if it be necessary to effect the correct amount payable to the wife hereunder. In addition to the payments referred to in the second preceding sentence, the husband shall reimburse the wife for necessary bills incurred by the wife in providing for the child reasonable clothing, piano lessons, and private schooling, if used (so long as the child is a minor), and also for any extraordinary medical and dental expenses of the child. Any payments under the provisions of this paragraph 2 shall commence immediately following the entry of said decree and shall continue from and after said date for the remainder of the wife's natural life, or until such time as she shall re-marry. If the wife shall re-marry, then immediately upon the occurrence of said re-marriage, payments as set forth in this paragraph 2 shall *829 automatically cease, but in the event of such re-marriage the husband shall continue*129 to pay for the support of the child so long as the child is a minor in an amount which shall be agreed upon by and between the parties hereto, or, if the parties cannot so agree, as determined by Court. In any event, payments provided for in this paragraph and in paragraph 1 hereof shall automatically cease and terminate upon the death of the husband. * * *
* * * *
9. The husband and wife do hereby release, acquit, and forever discharge the other from any and all claims which he or she now has or may hereafter have against or upon the other for payment of maintenance or alimony excepting as herein provided. Each of the parties hereto agrees that he or she will not under any circumstances ask any court in any divorce or separate maintenance action or otherwise for any allowance for alimony, support and maintenance or for any decree, judgment or order affecting the property rights of the parties hereto other than as provided and set forth in this agreement.
On or about June 12, 1946, Idy Hollander, then a resident of Nevada, instituted divorce proceedings against petitioner. Petitioner did not contest the proceeding and on June 12, 1946, a decree of divorce was entered by the Nevada*130 court, under the terms of which the agreement of March 6, 1946, was made a part of the decree, and the parties were ordered to comply therewith. Thereafter petitioner performed all of his obligations under the said agreement pursuant to the decree of the court. The decree of divorce was as follows:
DECREE OF DIVORCE
The above entitled action coming on regularly for trial before the above entitled Court, without a jury, on the 12th day of June, 1946, plaintiff appearing in person and by her attorneys, Jones, Wiener and Jones, and the defendant having made a general appearance by and through his attorney, OSCAR W. BRYAN, and having filed an Answer and waived the right to findings of fact and conclusions of law and consenting to the trial of the above entitled action, and the Court having heard and duly considered the evidence, and good cause appearing therefor;
It Is Ordered, Adjudged and Decreed that the bonds of matrimony now and heretofore existing between the plaintiff and defendant be, and the same are hereby dissolved, set aside, and held for naught, and the parties restored to their single status.
It Is Further Ordered, Adjudged and Decreed that the property settlement agreement*131 of the 6th day of March, 1946, be, and the same is hereby ratified, confirmed and approved by this Court and made a part of this decree.
It Is Further Ordered, Adjudged and Decreed that the parties hereto comply with all the requirements contained in the above mentioned property settlement agreement.
It Is Further Ordered, Adjudged and Decreed that the Court hereby retains jurisdiction of this action and the parties hereto for the purpose of making such other and further order as may be just and proper for the custody, support and maintenance of the minor child of the parties, to-wit, Barbara Mia Hollander, over whose care, custody and control there is no controversy at this time.
Dated this 12th day of June, 1946.
A. S. HendersonDistrict Judge.
*830 In 1948, Idy "made known" to petitioner "the fact that she desired to remarry." The man whom she desired to marry was "relatively impecunious." Although granted custody of the daughter, Barbara Mia, Idy, due to "various circumstances," had not kept the child with her but, by mutual agreement, the child had lived with petitioner after November 1946. Notwithstanding the provision of the first agreement that the alimony payments*132 thereunder were to cease automatically in the event of Idy's remarriage petitioner, "In order to enable the remarriage of Idy Hollander and to obtain legal custody of the said child * * * voluntarily entered into" a second agreement under date of March 16, 1948, which, in part, was as follows:
Whereas, the parties hereto were heretofore married and were legally divorced on the 12th day of June, 1946 in the Eighth Judicial District Court of the State of Nevada in and for the County of Clark, and,
Whereas, prior to said decree the parties entered into a Property Settlement Agreement dated March 6, 1946, which Property Settlement Agreement was referred to under the provisions of said decree and was incorporated therein and was ratified and confirmed, and,
Whereas, said Property Settlement agreement provides for certain payments to be made by Second Party to First Party until such time as First Party remarries and not thereafter and provides that the child of the parties, to-wit: BARBARA MIA, shall remain in the custody of the First Party with the rights of visitation and other rights in the part of Second Party, and,
* * * *
Whereas, First Party desired to remarry, but nevertheless desires*133 that said payments be continued to be made by Second Party to First Party after such remarriage for a period of time, notwithstanding the provisions of said Property Settlement Agreement in said decree, and Second Party is willing to continue to make such payments upon conditions hereinafter set forth, and,
Whereas, the parties hereto desire that certain revisions be entered into in said Property Settlement Agreement,
Now, Therefore, It Is Agreed as Follows:
1. Notwithstanding the provisions of said Property Settlement Agreement, and in settlement of Second Party's obligations for alimony under said Property Settlement Agreement, Second Party will continue to pay to First Party the sum of Five Hundred Fifty Dollars ($ 550) per month on the first day of each and every month, beginning with the first day of March, 1948, and continuing to and including the first day of February, 1951, and shall pay to First Party the sum of Two Hundred Fifty Dollars ($ 250) per month from the first day of March, 1951 until the first day of February, 1954. Said payments shall continue as provided in this paragraph notwithstanding the fact that the First Party remarries at any time hereafter, and should*134 Second Party die prior to February 1, 1951, said payments shall continue until February 1, 1951, and shall be payable by the estate of Second Party as herein provided until said first day of February, 1951 and not thereafter. Should Second Party die between February 2, 1951 and February 28, 1954, said payments shall cease on the date of his death. Said payments shall cease upon the death of First Party. Whether or not First Party remarries, the obligations of Second Party to First Party to make payments under this agreement or under said Agreement of March 6, 1946, or otherwise, shall cease with the payment to be made on February *831 1, 1954 or on the date of the death of the First Party, whichever event earlier occurs. * * * It is further understood and agreed that one of the important considerations moving Second Party to make payments to First Party during the fourth, fifth and sixth years hereof at the rate of Two Hundred Fifty Dollars ($ 250) per month, is the fact that the child of the parties is now remaining with Second Party. Payments for said fourth, fifth and sixth year shall cease if and when continuous custody is given to the First Party during or prior to *135 the commencement of said third, fourth or fifth years, and First Party from and after said date waives any claim to such payments pursuant to the provisions of this paragraph. The obligation of the Second Party to make payments to the First Party pursuant to the provisions of this paragraph are in settlement of the obligations of Second Party to support First Party pursuant to the provisions of Paragraph 2 of the Property Settlement Agreement dated March 6, 1946. In consideration of the Second Party's agreement to make payments under this agreement notwithstanding the remarriage of First Party, the provisions of Paragraph 2 of the Property Settlement Agreement dated March 6, 1946 are hereby cancelled and terminated and shall have no force or effect whatsoever, it being expressly understood and agreed that the sole obligation on the part of Second Party to First Party for support, alimony and/or maintenance by reason of the prior marriage between the parties hereto shall be as set forth in this agreement which shall supersede and take the place of the provisions of said Paragraph 2 of said Property Settlement Agreement. First Party does hereby waive any claim for support, maintenance, *136 or otherwise except as in this agreement provided and does release Second Party of any other claims, demands and causes of action of any kind or character except as provided in this agreement. * * *
Idy Hollander remarried on March 29, 1948.
Subsequent to June 12, 1946, Idy had become a resident of California. On or about May 18, 1948, an action was instituted by petitioner in the Superior Court of the State of California, in and for the County of Los Angeles, to establish the Nevada judgment of divorce as a foreign judgment. On June 30, 1948, the California court entered a decree as follows:
This cause came on to be heard before Honorable STANLEY MOSK, Judge Presiding in Santa Monica Department A on the 30th day of June, 1948, I. H. PRINZMETAL of Prinzmetal & Grant appearing as attorney for the plaintiff, the defendant having filed a Notice of Appearance through her attorney, Milton Wichner, and no answer having been filed by the defendant, and the default of the defendant having been duly entered and the parties hereto having filed a Stipulation consenting to the entry of this Order,
It Is Ordered, Adjudged and Decreed:
(1) That the judgment of divorce rendered by the Eighth Judicial*137 District of the State of Nevada in and for the County of Clark be established as a foreign judgment and that the same be enforced in this action subject to modifications as herein set forth;
(2) That the agreement between the parties dated March 16, 1948 be and the same is hereby ratified, confirmed and approved and the plaintiff is ordered to make payments to the defendant pursuant to said property settlement agreement.
*832 (3) It Is Further Ordered, Adjudged and Decreed that until the further order of the Court the Plaintiff be and is hereby awarded the care, custody and control of BARBARA MIA HOLLANDER, the minor child of the parties hereto but with full rights of visitation by the defendant.
Done in Open Court this 30th day of June, 1948.
Stanley Mosk,
Judge.
On or about August 5, 1948, petitioner married Clemence Blum Hollander. Petitioner is presently a resident of Los Angeles, California, and Clemence Hollander is presently a resident of San Francisco.
During 1948 petitioner made 12 monthly payments of $ 550 each to his former wife, paid $ 1,990.40 to the Federal Government on account of her liability for 1947 Federal income tax and paid $ 67 to the State of California*138 on account of her liability for 1947 California income tax. 1 The aggregate amount of these payments was $ 8,657.40. Petitioners claimed the full amount of the payments as an alimony deduction on their 1948 income tax return. In connection with the amount so claimed, the respondent allowed $ 2,057.40 as representing amounts paid by petitioner on account of Idy's 1947 liability for Federal and California income taxes and $ 1,650 as representing 3 monthly payments of $ 550 each made to Idy during the first 3 months of 1948. The balance of the amount claimed by petitioners as an alimony deduction on their 1948 return was disallowed.
During 1949 petitioner made 12 monthly payments of $ 550 each to Idy, paid $ 1,225.44 to the Federal Government on account of her liability*139 for 1948 Federal income tax and paid $ 42 to the State of California on account of her liability for 1948 California income tax. The aggregate amount of these payments was $ 7,865.44. Petitioners claimed the full amount of these payments as an alimony deduction on their 1949 return. The entire amount so claimed by petitioners on their 1949 return was disallowed by respondent.
OPINION.
Section 23 (u) of the Internal Revenue Code of 19392*140 provides that payments which are includible, under section 22*833 (k), in the gross income of the wife, are deductible by the husband in computing his net income. In section 22 (k)3 it is provided that there shall be included in the gross income of the wife periodic payments received by her under a decree of divorce or a written instrument incident to the divorce and in discharge of a legal obligation which, because of marital or family relationship, is imposed upon the husband by such decree or written instrument.
Stated briefly, the facts are as follows: Petitioner and Idy Hollander*141 were divorced in June 1946. More than 2 months prior to the divorce, and in contemplation thereof, petitioner and Idy had entered into an agreement looking to the settlement of all property and support claims, one against the other. This agreement provided for alimony payments to Idy for so long as she lived, or until her remarriage, or until petitioner's death, and was incorporated in the decree of divorce. The agreement specifically provided that petitioner and Idy release, acquit, and forever discharge each other "from any and all claims which he or she now has or may hereafter have against or upon the other for payment of maintenance or alimony excepting as herein provided." In 1948, 2 years subsequent to the divorce, Idy made known to petitioner her desire to marry a man who was "relatively impecunious." "In order to enable Idy to remarry," petitioner entered into a second agreement providing for payments to her subsequent to her pending remarriage, and Idy was remarried within 2 weeks of the execution of this agreement.
Respondent has disallowed all payments made subsequent to Idy's remarriage, contending that the payments were not in discharge of a legal obligation arising*142 out of a marital or family relationship, nor in discharge of an obligation imposed or incurred under a divorce decree or written instrument incident to a divorce or separation, within the meaning of section 22 (k), and therefore are not deductible under section 23 (u).
It is the position of petitioner, on the other hand, that "where a divorced husband is under a continuing obligation to support his former wife, imposed by a decree or agreement incident to divorce, *834 any payments made to discharge this obligation are payments made in discharge of an obligation arising out of the marital or family relationship, even if the obligation is revised by an agreement subsequent to divorce." He cites Dorothy Briggs Smith, 16 T. C. 639, affd. 192 F. 2d 841; Newton v. Pedrick, 212 F.2d 357">212 F. 2d 357, reversing 115 F. Supp. 368">115 F. Supp. 368; and Raoul Walsh, 21 T. C. 1063. In each of those cases, as petitioner indicates in his statement with respect to the principle contained therein, there was a "continuing obligation" on the part of the husband to support his*143 former wife. In the instant case, that is not true, and this fact distinguishes this case from those cited.
A review of the Smith case and the rationale of the decision illustrates the variance between that case and the instant one. In the Smith case, during the pendency of divorce proceedings, in 1937, an agreement was entered into for the payment of $ 1,000 a year to the wife for her support and the support of the two minor children. The agreement provided that a final decision as to the support to which the wife would be entitled in her own right would be made at a later date. The divorce was thereafter granted to the wife and the 1937 agreement was made part of the final decree. In 1944, after the husband had made a motion in the divorce court for a reduction of support payments, the parties executed an agreement which terminated the provisions of the 1937 agreement and provided for the payment by the husband of $ 5,000 a year to the wife for her support. In 1946 the divorce court recognized this agreement. We there held that the payment of $ 5,000 by the husband in 1948, under the terms of the 1944 agreement, was received by the taxpayer in discharge of a legal*144 obligation which, because of the marital relationship, was incurred by the husband under a written instrument incident to the final decree of divorce. A study of the facts of that case leads to the conclusion that the 1944 agreement was a revision of the 1937 agreement, which admittedly was incident to divorce and in discharge of the husband's obligation for support. A like study of the facts presented in the instant case leads to a contrary conclusion. Unlike the 1937 agreement in the Smith case, the 1946 agreement here did not leave open the final disposition of the amount of support to which petitioner's former wife would be entitled. To the contrary, the 1946 agreement between petitioner and Idy was specific and delineated "a permanent and final settlement and adjustment between themselves with regard to their assets, property and property rights and obligations for support and maintenance which each has or may have or owe to the other or to the minor child." The payments to be made under the 1946 agreement were automatically to cease upon Idy's remarriage, and it was further provided in the agreement that both parties released, acquitted, and forever discharged the other*145 "from any and all claims which he or she now has or *835 may hereafter have against or upon the other for payment of maintenance or alimony excepting as herein provided." Petitioner, under the 1948 agreement, thus agreed to make payments to his former wife even after her remarriage and for which there was and could be no obligation under the specific terms of the first agreement, which in turn had been "ratified, confirmed and approved" in the divorce decree subsequent thereto. Although the second agreement contained words to the effect that it was in settlement of petitioner's obligations for alimony under the first agreement, there could under the first agreement be no liability for the payments here in question. The decree of divorce and the 1946 agreement incorporated therein had specified with particularity that petitioner should have no obligation to support Idy after her remarriage. The 1948 agreement, however, is bottomed on her contemplated remarriage and to a man apparently incapable of supporting her in keeping with her tastes or desires. It thus appears, we think, that the second agreement was not incident to the divorce of petitioner and Idy, but incident to *146 Idy's remarriage, and the payments made thereunder were not only not within the purpose or intent of the first agreement but petitioner's nonliability for such payments, to borrow from the words of the agreement, had been permanently and finally settled.
Petitioner argues that his promise to make payments to Idy after her remarriage was not without consideration, in that he obtained a reduction in the amount and duration of his alimony obligation to her and the immediate legal custody of his daughter. The contention that petitioner reduced the amount and duration of his alimony is necessarily based on the supposition that Idy would not remarry unless petitioner acquiesced in continuing the alimony payments, a supposition in respect of which there is no evidence whatever. With respect to the custody of the child, it appears from the 1948 agreement that petitioner had custody of the child through a "mutual agreement" with Idy prior to the execution of the 1948 agreement and that that agreement did no more than formalize what had already been accomplished in fact by the parties many months prior to the making of that agreement.
It is our conclusion, for the reasons stated, that the *147 payments made subsequent to Idy's remarriage were not made in discharge of a legal obligation which, because of the marital or family relationship, was imposed upon or incurred by petitioner as incident to divorce, and are not within the contemplation of section 22 (k), as petitioner contends. Accordingly, they are not deductible by him under section 23 (u).
Decision will be entered for the respondent.
Footnotes
1. The 1946 agreement provided for the withholding by petitioner of amounts necessary to pay all income taxes which might be assessed against Idy on account of the payments to be made under the agreement. The 1948 agreement contained a similar provision.↩
2. SEC. 23. DEDUCTIONS FROM GROSS INCOME.
In computing net income there shall be allowed as deductions:
* * * *
(u) Alimony, Etc., Payments. -- In the case of a husband described in section 22 (k), amounts includible under section 22 (k) in the gross income of his wife, payment of which is made within the husband's taxable year. If the amount of any such payment is, under section 22 (k)↩ or section 171, stated to be not includible in such husband's gross income, no deduction shall be allowed with respect to such payment under this subsection.
3. SEC. 22. GROSS INCOME.
(k) Alimony, Etc., Income. -- In the case of a wife who is divorced or legally separated from her husband under a decree of divorce or of separate maintenance, periodic payments (whether or not made at regular intervals) received subsequent to such decree in discharge of, or attributable to property transferred (in trust or otherwise) in discharge of, a legal obligation which, because of the marital or family relationship, is imposed upon or incurred by such husband under such decree or under a written instrument incident to such divorce or separation shall be includible in the gross income of such wife, and such amounts received as are attributable to property so transferred shall not be includible in the gross income of such husband. This subsection shall not apply to that part of any such periodic payment which the terms of the decree or written instrument fix, in terms of an amount of money or a portion of the payment, as a sum which is payable for the support of minor children of such husband. * * *↩