*7 Decision will be entered for the respondent.
Petitioners, husband and wife during the taxable years, were engaged in divorce proceedings. They filed joint income tax returns for those years. Held, litigation expenses incurred by the wife were not deductible in the joint returns. Those expenses related in substantial part to the spouses' community property, and to the extent that they related to alimony they were allocable to alimony pendente lite which was not reportable as income in the joint returns. Sec. 71(a)(3), I.R.C. 1954. The wife abandoned her claim to permanent alimony and any possible remaining portion of the litigation expenses relating to the claim for permanent alimony was comparatively inconsequential and highly speculative in character. Ruth K. Wild, 42 T.C. 706, distinguished.
*291 The Commissioner determined deficiencies in petitioners' income tax for 1961 and 1962 in the amounts of $ 666.93 and $ 3,190.41, respectively. The only adjustments in controversy are the Commissioner's disallowance of deductions claimed for legal and auditing fees incurred by petitioners in connection with their divorce in the amounts of $ 1,419 for 1961 and $ 4,119.70 in 1962.
FINDINGS OF FACT
The stipulation of facts and accompanying exhibits are incorporated herein by reference.
Petitioners, Gerald G. and Rima Wolfson, were husband and wife and resided in Los Angeles, Calif., in 1961 and*9 1962. Both were engaged in gainful activities, he as a practicing lawyer and she as a head nurse in a Veterans' Administration hospital. They separated on March 8, 1961, and Rima filed suit for divorce on September 13, 1961. Petitioners filed joint income tax returns for 1961 and 1962 with the district director of internal revenue at Los Angeles.
The complaint in the divorce action set forth extreme cruelty as the grounds for divorce. The complaint contained numerous allegations relating to the community property of the spouses, stated to have a total estimated value of $ 140,000, but alleged that the exact nature and extent thereof were unknown to the wife, and requested that the husband be required to give a full accounting of all of the community property. It also requested that the court order the husband to pay the wife during the pendency of the action a reasonable sum for her support and maintenance, reasonable attorney's fees, and a reasonable allowance for costs and expenses; and that upon trial of the action the court award her a reasonable sum as alimony for her support and maintenance and a reasonable sum for attorney's fees.
In his answer and cross-complaint the *10 husband admitted that certain property listed in the complaint was community property; denied that the community property was of the value alleged in the complaint; and also denied most of the other allegations. In her answer to the cross-complaint the wife admitted that all of the property listed therein was community property, with the exception of her interest in a Veterans Administration Pension Fund, and alleged that there was other and additional community property the exact description and value of which were unknown to her.
On September 13, 1961, the Superior Court of the State of California in and for the County of Los Angeles ordered the husband to appear *292 before the court and show cause why he should not be required to pay the wife reasonable sums for her support and maintenance, attorney's fees, and court costs during the pendency of the action. Pursuant to that order a hearing was held in October 1961 primarily on the question of the husband's liability for alimony pendente lite. At that hearing the husband contended that, since there were no children of the marriage, the wife's salary as head nurse at a Veterans Administration hospital was adequate to *11 take care of all of her needs. She contended that it was necessary for her to obtain alimony pendente lite in order that she might continue to receive the intensive psychiatric care she had been receiving. The hearing consumed 1 entire day, and largely revolved around the testimony of the wife's psychiatrist. At the close of the hearing, the court ordered the husband to pay the wife $ 250 a month, plus payments on their home and real estate taxes, during the pendency of the action. He made these payments until April 1962.
At the October 1961 hearing the husband filed with the court an affidavit signed by him on October 4, 1961, to which was attached a statement prepared by a certified public accountant, dated September 28, 1961, listing the community property of petitioners as amounting to $ 75,059.
The case was set for trial on April 18, 1962, in the Superior Court of the State of California in and for the County of Los Angeles. A "Joint Pre-Trial Statement" was filed with the court in March 1962 by the attorneys for both parties. Therein, after stating that "All discovery proceedings in this cause have been completed and no other or further discovery proceedings are either*12 pending or contemplated," the property owned by the parties was listed and it was stipulated and agreed that all of that property, with the exception of a few items of personal property claimed to be separate property, was community property to be divided equally between them as stated therein. According to the joint pretrial statement the issues remaining in dispute related to the separate or community nature of the items of personal property not covered by the agreement; whether the wife needed and was entitled to alimony after the divorce; and whether the husband should pay her attorney's fees and costs "over and above" those theretofore awarded to her.
No trial was held on April 18, 1962. On the morning of that day counsel for the parties went into the judge's chambers and the wife waived her claim for alimony after divorce. Counsel for both parties then entered into a stipulation with respect to items of property not covered by their prior agreement; the husband agreed to pay the wife's counsel $ 500 for attorney's fees and $ 48 for costs, and to pay her doctor a witness fee of $ 200 and an accountant a fee of $ 150; she agreed to waive her claim for alimony after divorce; *13 and he withdrew his answer and cross-complaint and agreed that "the matter may be *293 heard as a default." The value of the property ultimately divided between the parties amounted to $ 73,197 and the wife also received about $ 5,000 from the collection of accounts receivable from her husband's law business.
On May 15, 1962, an interlocutory judgment of divorce (default), incorporating the agreement of the parties, was entered by the court, and a final judgment of divorce was entered on May 23, 1963.
The parties herein have stipulated that in relation to the petitioners' divorce judgment they incurred the following legal and accounting expenses in 1961 and 1962:
| 1961 | 1962 | |
| Petitioner-husband's attorney | $ 600 | $ 400.00 |
| Petitioner-wife's attorney | 600 | 3,038.57 |
| Accounting fees | 219 | 150.00 |
| Witness fees and court costs | 781.13 | |
| 1,419 | 4,369.70 | |
| Less: "Portion attributable to Divorce" | 250.00 | |
| Total per returns | 1,419 | 4,119.70 |
All of the 1961 expenses were paid with community funds. As to the 1962 expenses, the entire $ 400 paid to the husband's attorney was from his separate property, $ 2,490.51 of the $ 3,038.57 paid to the wife's attorney was from her*14 separate property, and all of the remaining 1962 fees were paid from community funds.
The $ 781.13 item "Witness fees and court costs" in the foregoing tabulation consisted of a $ 200 fee paid to the wife's psychiatrist, a $ 260 fee paid to a psychiatrist hired by the husband, and $ 321.13 in court costs. The fees to both psychiatrists were paid in connection with the October 1961 hearing on the question of the husband's liability for support pendente lite.
In their 1961 joint return petitioners claimed deductions aggregating $ 1,419 in connection with the legal and accounting fees paid that year, and such fees were described in that return as follows:
| Attorneys fees and auditing fees incurred in legal action to | |
| determine property rights (H) & (W): | |
| Legal fees | $ 1,200 |
| Accountants fees | 219 |
| 1,419 |
In their 1962 joint return petitioners claimed deductions in the net aggregate amount of $ 4,119.70 in connection with the 1962 divorce expenses, and such expenses were listed in the return under a heading which read: "Legal & Accounting Fees Relating to Property."
The Commissioner disallowed the foregoing deductions of $ 1,419 and $ 4,119.70 for 1961 and 1962, respectively.
*15 *294 OPINION
Petitioners no longer contend that they are entitled to deduct the full amounts claimed on their returns. Thus, the husband, who represented both spouses at the hearing, appeared to recognize that under United States v. Gilmore, 372 U.S. 39, and United States v. Patrick, 372 U.S. 53, the expenses in the divorce proceedings incurred by him might not be deductible, 1 and he conceded that the portion of the legal fees which he paid to his wife's attorney could not be deducted. 2*16 It is his contention, however, that the portion of the expenses paid by her in respect of alimony is deductible under section 1.262-1(b)(7) of the regulations 3 and the decision of this Court in Ruth K. Wild, 42 T.C. 706.
The regulations, which were relied upon in the Wild case, contain an exception to the general rule that was applied in the Gilmore and Patrick cases. Under that general rule expenses incurred in divorce proceedings ordinarily are not deductible because they are personal*17 in nature, even to the extent that they are connected with the division or safeguarding of income-producing property. The exception relates solely to expenses incurred by the wife for the production or collection of amounts "includible in gross income under section 71," which deals with the taxability of alimony and similar amounts received by a wife as separate maintenance or support in connection with the marital relationship. And in the Wild case itself the divorced wife was allowed a deduction in respect of expenses incurred in obtaining alimony which she included in her gross income in her separate return.
Thus, even as to that portion of the expenses that can be segregated as having been paid by the wife, it is necessary to make a further allocation to determine what portion thereof is properly attributable to the production or collection of amounts includable in gross income under section 71. Cf. Barbara B. LeMond, 13 T.C. 670; Estate of *295 , 37 T.C. 664. And it is petitioners' contention that 80 percent of the fees paid by the wife are allocable to alimony, with the consequence that such*18 portion of those fees would be deductible. There are two fatal flaws in this contention.
First, we do not accept the argument or place any substantial reliance upon the evidence that only 20 percent of the fees related to community property and other matters connected with the divorce. Our appraisal of the evidence as a whole persuades us that there was substantial controversy involving the community property, and that the difficulties relating thereto were ultimately resolved only after serious negotiation between counsel. It is our judgment that considerably more than 20 percent of the fees paid by the wife was allocable to the community property and other matters unconnected with alimony or support.
In the second place, even as to that portion of the fees allocable to alimony or support, the record fails to sustain petitioners' position that the regulations or the Wild case would be applicable. The very essence of those regulations is that the deduction is allowed only in connection with amounts expended for the production or collection of amounts includable in gross income under section 71. 4*20 And the only alimony which the wife received here was alimony pendente lite*19 , or temporary alimony, for a period of about 6 months, which would have been includable in gross income, if at all, only under section 71(a)(3). Cf. Florence Korman, 36 T.C. 654, affirmed 298 F. 2d 444 (C.A. 2). But in this case, such temporary alimony was not includable in gross income because the parties filed joint returns for 1961 and 1962, and *296 section 71(a)(3) explicitly provides that "This paragraph shall not apply if the husband and wife make a single return jointly." 5
Moreover, to the extent that alimony or support was involved in these proceedings, it is our conclusion upon the basis of the materials before us that virtually the entire portion of the fees relating thereto was applicable to the alimony pendente lite upon which a hearing was held, and not to the claim for alimony after divorce which the wife ultimately abandoned. Furthermore, even as to any minor portion of the fees that may possibly have been allocable to the claim for alimony*21 after divorce, it is by no means clear on this record that any such alimony if awarded would have been includable in the wife's gross income so as to lay the foundation for deducting the fees. For it is wholly possible on the facts before us that the wife's claim might have been satisfied by the payment of a lump sum either in a single payment or in installments so as not to be covered by section 71(a)(1). And it need hardly be added that the record contains no evidence of any kind that would make section 71(a)(2) applicable.
We conclude that no part of the expenses relating to alimony pendente lite is deductible and that the possible deductibility of any remaining portion of the fees in respect of the claim for permanent alimony -- assuming that such deduction would otherwise be allowable even where no permanent alimony was in fact awarded, a matter that certainly is not free from doubt -- is so speculative on this record that petitioners have not shown any error in the Commissioner's disallowance of the entire deduction.
Decision will be entered for the respondent.
Footnotes
1. We know of no ground upon which his own expenses would be deductible, and since he makes no argument on brief that such expenses are deductible, we regard the point abandoned to that extent.↩
2. He stated: "Whatever I paid to Mr. Schoichet [wife's attorney] for my share of the community will not be deductible."↩
3. Sec. 1.262-1 Personal, living, and family expenses.
(a) In general. In computing taxable income, no deduction shall be allowed, except as otherwise expressly provided in chapter 1 of the Code, for personal, living, and family expenses.
(b) Examples of personal, living, and family expenses. * * *
* * * *
(7) Generally, attorney's fees and other costs paid in connection with a divorce, separation, or decree for support are not deductible by either the husband or the wife. However, the part of an attorney's fee and the part of the other costs paid in connection with a divorce, legal separation, written separation agreement, or a decree for support, which are properly attributable to the production or collection of amounts includible in gross income under section 71↩ are deductible by the wife under section 212.
4. SEC. 71(a) General Rule. --
(1) Decree of divorce or separate maintenance. -- If a wife is divorced or legally separated from her husband under a decree of divorce or of separate maintenance, the wife's gross income includes periodic payments (whether or not made at regular intervals) received after 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 on or incurred by the husband under the decree or under a written instrument incident to such divorce or separation.
(2) Written separation agreement. -- If a wife is separated from her husband and there is a written separation agreement executed after the date of the enactment of this title, the wife's gross income includes periodic payments (whether or not made at regular intervals) received after such agreement is executed which are made under such agreement and because of the marital or family relationship (or which are attributable to property transferred, in trust or otherwise, under such agreement and because of such relationship). This paragraph shall not apply if the husband and wife make a single return jointly.
(3) Decree for support. -- If a wife is separated from her husband, the wife's gross income includes periodic payments (whether or not made at regular intervals) received by her after the date of the enactment of this title from her husband under a decree entered after March 1, 1954, requiring the husband to make the payments for her support or maintenance. This paragraph shall not apply if the husband and wife make a single return jointly.↩
5. The reason for the inapplicability of sec. 71(a)(3)↩ in the case of a joint return is obvious. If the amounts in question were taxable as income to the wife they would be offset by a deduction in precisely the same amount that would be available to the husband. Sec. 215. The net result in a joint return would thus be zero. In the present case, the temporary alimony was not reported as income in petitioners' joint return, and this circumstance itself underscores the reason for denying a deduction for expenses incurred in connection with a transaction that does not effectively result in the receipt of taxable income.