*12 Decision will be entered under Rule 50.
Held, that payments of alimony by petitioner B. R. DeWitt, which were received by his divorced wife, after the decree, but were related to periods prior to the decree, were deductible under
*554 The respondent determined a deficiency in the income tax of petitioners for the year 1953 in the amount of $ 10,590.02. *555 The sole issue presented here is the deductibility of a certain sum paid by petitioner Byron R. DeWitt to his former wife, Elinor P. DeWitt, after their divorce, pursuant to a written agreement between them, which agreement had been incorporated in the divorce decree.
FINDINGS OF FACT.
Some of the facts were stipulated and they are found accordingly.
Byron R. DeWitt and Helen W. DeWitt are husband and wife. They live at Pavilion, New York, and they filed their joint income tax return for the year 1953 with the district director of internal revenue at Buffalo, New*13 York. Helen W. DeWitt is a party by virtue of the joint return, so hereinafter the term "petitioner" will refer to Byron.
On May 14, 1953, a divorce action was pending between petitioner and his former wife, Elinor, in the Supreme Court of Genesee County, New York. On said date the parties to the divorce action entered into a memorandum of agreement, which contained the following clause:
The party of the first part, the husband, agrees to pay to the party of the second part, the wife, for her maintenance and support and for the maintenance and support of the two infant daughters, Judith M. DeWitt and Deborah G. DeWitt, the sum of Thirty Thousand ($ 30,000.00) Dollars annually, payable in equal monthly installments of Two Thousand Five Hundred ($ 2,500.00) Dollars in advance beginning as of the 1st day of February, 1953.
It was further provided in said agreement "that the provisions of this agreement shall be fully incorporated into and made a part of the interlocutory and final decree of divorce which may be granted to the party of the second part in the action pending as aforesaid and shall become effective only if and when incorporated into such decrees."
An interlocutory decree*14 of divorce was entered in the action on June 4, 1953. Thereafter, on September 8, 1953, the interlocutory judgment of divorce became final and the final decree entered on said date incorporated the May 14, 1953, agreement.
Thereafter, on September 8, 1953, petitioner paid Elinor $ 16,422.59 representing:
| Installments February to September, inclusive, under alimony | |
| provision (8 months at $ 2,500) | $ 20,000.00 |
| Offsetting items, representing salaries received by Elinor P. | |
| DeWitt from corporations controlled by Byron R. DeWitt, and | |
| taxes withheld on same | 3,577.41 |
| 16,422.59 |
After said payment, petitioner made four additional payments to Elinor in the year 1953 totaling $ 10,000. Petitioner took a deduction in his income tax return for the year 1953 in the total amount of $ 26,422.59 paid to Elinor in the year 1953 and Elinor included in her individual income tax return for the year 1953 the said amount paid *556 by petitioner and she paid the income tax thereupon shown to be due.
Respondent allowed the four payments totaling $ 10,000 which were paid in 1953 subsequent to the divorce and $ 2,500 of the September 8, 1953, payment of $ 16,422.59 and disallowed the*15 balance, or $ 13,922.59, stating in the notice of deficiency that said sum "is not an allowable deduction under the provisions of
In 1956 Elinor filed a claim for refund in the amount of $ 7,171.72 due to the overstatement of the alimony income in her 1953 income tax return in the amount of $ 13,922.59.
OPINION.
The agreement between the petitioner and Elinor provided for payments of $ 2,500 a month beginning with February 1953 but further provided nothing was to be paid thereunder unless the agreement was incorporated in a divorce decree in a divorce action then pending between the parties. It was incorporated in the decree entered the following September and thereafter in September and the remaining months of 1953 petitioner paid Elinor the full amount due under the agreement and Elinor included the payments in her 1953 income and petitioner took deduction therefor under
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 *17 of such husband. * * *
This is a case where it is peculiarly necessary to place the exact issue in proper perspective. Respondent states the issue to be: "Whether a payment made subsequent to a divorce for periods prior to the divorce are deductible under
While the inquiry here is as*18 to the amount of petitioner's deduction, the design of the two sections makes whatever he pays, that is includible in the wife's gross income, deductible in his. The payments here were periodic.
The statute (sec. 22 (k)) furnishes an objective test for the divorced wife to employ with respect to including the payments she receives in her gross income. It is based on the time of receipt, tied to an easily determined event -- a familiar test in the field of income taxation. If she receives periodic payments after the entry of the divorce decree, the plain command of the statute is that they are to be included in her gross income.
Respondent, in order to prevail, has*19 to read into the statute a new test which would authorize her to relate the periodic payments she receives after the divorce to periods before and after the entry of decree and omit from her gross income the portion of the periodic payments which are properly related to or, in respondent's words, "payment for" periods prior to the divorce. While the instant case, due to the wording of the agreement, would create no great problem in allocating portions of payments to periods before and after the entry of the divorce decree, it requires no great foresight to see the problems that would arise in the majority of cases if the test of relating the payments to periods is to be added to the statute. In every case the divorced wife who receives periodic payments either under the mandate of the decree or under a written instrument "incident" to the divorce would have an interest in allocating as much of the payment as possible that she receives after the decree, to a period before the decree. The divorced husband would *558 be just as interested under the corollary statute (
We have previously quoted all that is contained in respondent's brief by way of argument to support his position. He merely adds thereto the citation of and a quotation from
We think this is putting into the statute something that is plainly not there and was never intended to be there. Section 22 (k) is a taxing statute which follows the pattern of many statutes by imposing the tax in a definition of what is to be included in gross income. It provides a simple objective test of easy application and well it should for it is to be used by all divorced wives who receive periodic payments, in computing their gross income. It tells the divorced wife to include in her gross income all of the periodic payments she receives after the decree. It certainly is more desirable that the conflicting interests of the divorced parties be settled by recourse to the time of a certain event, such as the entry of a decree, rather than*22 such factors as proper interpretation of decrees and written instruments and the intention of the parties. We can see how it would lead to endless confusion if the divorced wife who is to report her income and include periodic payments received after the decree, is left with the problem of allocating a portion thereof to a period before the decree. That question would *559 exist in nearly every case in the ordinary divorce unless the decree was entered on the first day of a month or the first day of a year where the periodic payments were fixed on a monthly or yearly basis. It is significant in this case that respondent allowed the full deduction for September, which means he would charge the wife with receiving income for part of the payment that was for 8 days prior to the decree since the decree was entered on September 8, 1953.
We find no language in the statute indicating such an intent and nothing in the legislative history of sections 22 (k) and 23 (u) which would indicate a legislative intent that the divorced wife is to include in her gross income anything less than all of the periodic payments she receives in any taxable year after the divorce.
In
We see no reason for attaching the elusive test of allocation of payments to periods, to the certain test of time of receipt. Some of the other tests that are stated in the statue such as "legally separated" and "a written instrument incident to such divorce" (emphasis supplied) have been most fruitful of litigation for they are not based upon an event and there could be a logical debate under various fact situations of whether there was or was not a legal separation or a written instrument that was incident to the divorce. Here we are in an area where it is admitted the payment was made after the decree under an agreement incident to the divorce. The explicit language of the statute places the full payment in the wife's gross income. To hold she could omit part of such payment from her gross income would be placing in the statute a new test of relating*24 payments to periods -- a test which we think was not intended and has not been followed generally and which would only lead to confusion and uncertainty in an area which the statute rendered certain.
We hold there is no requirement in the statute (sec. 22 (k)), that periodic payments received after the divorce must be for periods subsequent to the divorce; that all payments received by Elinor in the taxable year 1953 after the decree of divorce on September 8, 1953, were includible in her gross income and deductible under
Because of other adjustments, not contested,
Decision will be entered under Rule 50.
Footnotes
1. All section references are to the Internal Revenue Code of 1939, as amended, unless otherwise noted.↩