Pettid v. Commissioner , 77 T.C.M. 1816 ( 1999 )

FRED J. PETTID, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Pettid v. Commissioner

No 3716-97

United States Tax Court

T.C. Memo 1999-126; 1999 Tax Ct. Memo LEXIS 177; 77 T.C.M. 1816; T.C.M. (RIA) 99126;

April 16, 1999, Filed

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">*177 Decision will be entered under Rule 155.

">*178 James R. Brown and Thomas R. Brown , for petitioner.

Henry N. Carriger and Albert B. Kerkhove , for respondent.

WHALEN, JUDGE.

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WHALEN

MEMORANDUM FINDINGS OF FACT AND OPINION

[1] WHALEN, JUDGE: Respondent determined the following deficiencies in petitioner's Federal income tax for the years in issue:

           Year       Deficiency

           ____       __________

           1993        $ 19,578

           1994         18,964

           1995         19,578

[2] After concessions, the sole issue for decision is whether monthly payments that petitioner made to Ms. Inga Wagner during the years in issue are properly treated as alimony and deductible under section 215(a) of the Internal Revenue Code, as petitioner contends, or as nondeductible payments in settlement of a claim for damages, as determined by respondent. Unless">*179 stated otherwise, all section references in this opinion are to the Internal Revenue Code in effect for the years in issue. Ms. Wagner was formerly known as Inga Wagner Bartling, and in various documents constituting the record of this case, Ms. Wagner is sometimes referred to as Ms. Bartling.

FINDINGS OF FACT

[3] This case was submitted fully stipulated pursuant to Rule 122 of the Tax Court Rules of Practice and Procedure. All Rule references in this opinion are to the Tax Court Rules of Practice and Procedure. The stipulation of facts, supplement to stipulation of facts, and the attached exhibits are incorporated herein by this reference. Petitioner resided in Omaha, Nebraska, at the time he filed his petition in this case.

[4] Petitioner married his first wife, Ms. Wilma Rae Pettid, on October 20, 1962. Slightly more than 19 years later, on March 12, 1982, the District Court of Douglas County, Nebraska (herein referred to as the district court), entered a decree dissolving this marriage.

[5] On or about May 5, 1982, petitioner obtained a license from the district court to marry Ms. Wagner. Petitioner and Ms. Wagner were purportedly married in a solemnization ceremony conducted ">*180 on May 8, 1982, less than 2 months after the decree dissolving petitioner's marriage to his first wife. Nebraska law provides that "a decree dissolving a marriage shall become final and operative * * * six months after the decree is rendered". Neb. Rev. Stat. sec. 42-372 (1988). Thus, at the time petitioner and Ms. Wagner were purportedly married, the decree dissolving petitioner's marriage to his first wife had not yet become final.

[6] Approximately 9-1/2 years later, on or about January 14, 1992, petitioner filed a petition for declaratory judgment in the district court seeking to have his putative marriage to Ms. Wagner declared void. The petition identifies petitioner as plaintiff and Ms. Wagner as defendant. The petition alleges in pertinent part as follows:

     3. On March 12, 1982, the marriage of Plaintiff, Frederick

   J. Pettid to Wilma Rae Pettid was decreed dissolved by the a

   [sic] Decree of the District Court of Douglas County, Nebraska,

   at Doc. 777, No. 168.

     4. On May 5 [sic], 1982, Plaintiff and Defendant were

   purportedly married in the city of Omaha, County of Douglas,

   Nebraska.

     5. Pursuant to applicable Nebraska">*181 statutes, Plaintiff,

   Frederick J. Pettid was under absolute disability to marry the

   Defendant on May 5 [sic], 1982.

     6. On or about January 13, 1992, in contemplation of

   instituting an action for dissolution of the above-noted alleged

   marriage, Defendant removed from a joint banking account of the

   parties $ 50,000, all of which was earned by, and belonged to,

   the Plaintiff herein.

     7. Defendant made no contribution to said monies which she

   has now taken and whose whereabouts are not known to Plaintiff.

[7] The petition requests the following relief from the court: To declare the purported marriage between petitioner and Ms. Wagner void; to determine that the $ 50,000 removed by Ms. Wagner, as alleged in paragraph 6 of the above-quoted petition, is the property of petitioner; to determine that Nebraska divorce law does not apply to this action; and to determine that petitioner and Ms. Wagner each be entitled to the property that he or she personally accumulated during the purported marriage. The declaratory judgment action, including amendments thereto described below, is referred to herein as the annulment proceeding.

[8] On">*182 April 20, 1992, Ms. Wagner filed a petition against petitioner in the district court. Ms. Wagner's petition alleges in pertinent part as follows:

     3. During the years 1981 and 1982, Pettid dated and courted

   Bartling [viz, Wagner].

     4. During the courtship, Bartling was a single person,

   having been legally divorced from a previous marriage.

     5. At all times during the courtship, Pettid represented

   himself to Bartling as a single person, who had been divorced

   pursuant to a dissolution of a previous marriage.

     6. During the courtship, Pettid established himself in a

   position of trust and confidence with Bartling which resulted

   from the courtship relationship.

     7. In or around August, 1981, Pettid asked Bartling to

   marry him, promising to marry her and cohabitate as husband and

   wife.

     8. Bartling accepted the good faith of Pettid and relied

   upon his representation to her that he was legally capable of

   entering into an agreement to marry her. Bartling, therefore

   having reasonably and justifiably given Pettid her trust and

   confidence, and accepting his good faith, ">*183 agreed to marry Pettid

   pursuant to his proposal.

     9. In anticipation of her planned marriage to Pettid, and

   with Pettid's knowledge and encouragement, Bartling resigned her

   employment in the Fall of 1981.

     10. In anticipation of her planned marriage to Pettid, and

   with Pettid's knowledge and agreement, Bartling sold her

   residence in the Fall of 1981 and moved into her parents' house,

   planning to remain a resident there until the marriage was

   solemnized.

     11. In anticipation of her planned marriage to Pettid, and

   at Pettid's specific request, Bartling gave funds to Pettid for

   business purposes, including his purchase of his medical

   practice and the purchase of certain real estate.

     12. Throughout the entire courtship and until March 12,

   1982, Pettid knew that he was not legally divorced from his

   first wife, Wilma Pettid. Pettid knowingly and intentionally

   concealed his true marital status from Bartling throughout their

   courtship and continued to conceal until January 14, 1992.

     13. On March 12, 1982, Pettid was decreed divorced from his

   first wife, Wilma, ">*184 by the District Court of Douglas County,

   Nebraska. The decree was not effective for six months from its

   date. Pettid knowingly and intentionally concealed this fact

   from Bartling from the date of the decree until January 14,

   1992.

     14. On or about May 5, 1982, Pettid and Bartling made

   application to the Douglas County Clerk for a marriage license.

   Pettid knowingly and falsely stated the date of his divorce

   decree as February 16, 1981. Bartling made application for such

   marriage license in good faith, based on her reliance on

   Pettid's affirmative statements that Pettid was legally capable

   of entering into the proposed marriage.

     15. On May 8, 1982, knowing himself to be under a legal

   prohibition from entering into a marriage, Pettid arranged a

   marriage ceremony in which Pettid and Bartling exchanged

   marriage vows in Douglas County, Nebraska * * *.

     16. Bartling participated in the solemnization ceremony and

   the reception without knowledge that Pettid's divorce was not

   final and without knowledge that Pettid was not legally capable

   of entering into a valid marriage. Bartling">*185 accepted Pettid's

   good faith and representations concerning his marital status in

   entering into and participating in the marriage ceremony with

   Pettid, and thereafter relied on the legitimacy of the marriage

   ceremony.

     17. Subsequent to May 8, 1982, and as a result of Pettid's

   fraudulent representations to Bartling that they were legally

   married and the purported marriage between Bartling and Pettid,

   Bartling was induced to live with Pettid as his wife.

     18. In reliance on the validity of the marriage and by

   reason of Pettid's fraudulent misrepresentations to Bartling

   that they were legally married, Bartling undertook certain

   actions, including, but not limited to the following:

        a. Bartling assumed Pettid's last name * * *;

          b. Bartling changed her status from that of a

        single person to a married woman, thereby being

        required to live meretriciously with Pettid;

        c. Bartling filed federal and state income tax returns

     as the spouse of Frederick J. Pettid for the years 1982

     through 1990;

     d. Bartling">*186 performed normal duties as Pettid's spouse,

     including housekeeping, cooking, laundry, tending to family

     activities, being active in civic and social groups as

     Pettid's wife;

        e. Bartling assisted in Pettid's medical practice

     development activities by being active in the medical

     community's social and charitable activities and assisting

     in the introduction of Pettid to other members of the

     medical profession, all of which assisted Pettid in the

     development of his medical practice;

        f. Bartling forsook her career in order to tend to her

     responsibilities as Pettid's wife;

        g. Bartling held herself out as a married woman * * *.

        h. By virtue of holding herself out as a married

     woman, Bartling thereby lost certain inheritances from her

     parents she would have had if she had been a single person

     at the time of their deaths.

Based upon the above allegations, Ms. Wagner's petition sets forth four separate grounds for relief: (1) Intentional infliction of emotional distress; (2) fraud and deceit and misrepresentation">*187 of capacity to marry; (3) breach of promise to marry; and (4) quantum meruit. The action instituted by Ms. Wagner is referred to herein as the Bartling lawsuit.

[9] On March 6, 1992, petitioner amended his declaratory judgment action into a petition for annulment of marriage. On or about April 27, 1992, petitioner filed a second amended petition for annulment of marriage (Domestic Law). The prayer for relief of the amended petition states as follows:

     WHEREFORE, Petitioner prays that the Court decree that the

   marriage of the parties be null and void; that each party should

   receive all property, whether real or personal, and moneys,

   securities and other valuable items of all types that each party

   personally accumulated during the period since May 5 [sic],

   1982; and for such other and further relief that the Court may

   deem just and proper.

[10] On November 19, 1992, petitioner and Ms. Wagner executed a Settlement Agreement and Mutual Release (the Annulment Agreement). This agreement provides in pertinent part as follows:

               RECITALS

     WHEREAS, on the 12th day of March, 1982, Pettid [i.e.

   Petitioner] ">*188 was divorced pursuant to a Decree of Dissolution

   entered in the District Court of Douglas County, Nebraska, in a

   matter entitled Wilma Rae Pettid, Petitioner vs. Frederick J.

   Pettid, Respondent (hereinafter referred to as "the Divorce"),

   contained at Docket 777, No. 168; and

     WHEREAS, on the 8th day of May, 1982, Pettid entered into a

   marriage ceremony with Wagner (hereinafter referred to as "the

   Marriage Ceremony"); and

     WHEREAS, the Marriage Ceremony took place during the six-

   month interlocutory period of the Divorce; and

     WHEREAS, Wagner was unaware of Pettid's legal inability to

   enter into a valid marriage and is an innocent party as

   otherwise referred to in Neb. Rev. Stat. section 42-378 (Reissue

   1988); and

     WHEREAS, Pettid filed a Petition for Declaratory Judgment

   which was amended to a Petition for Annulment of Marriage in a

   legal pleading entitled Frederick J. Pettid, Plaintiff, vs. Inga

   W. Bartling, a/k/a Inga W. Pettid, contained at Docket 903, Page

   208, in the District Court of Douglas County, Nebraska

   (hereinafter referred to as "the Annulment Lawsuit"); ">*189 and

     WHEREAS, Wagner has filed a civil suit for deceit, fraud,

   breach of contract and quantum meruit against Pettid in an

   action entitled Inga Bartling Pettid, Plaintiff, vs. Frederick

   J. Pettid, Defendant, in the District Court of Douglas County,

   Nebraska, at Docket 905, No. 797 (hereinafter referred to as

   "the Bartling Lawsuit"); and

     WHEREAS, the parties desire to resolve all differences

   pertaining to the Annulment Lawsuit and the Bartling Lawsuit

   between themselves.

     NOW, THEREFORE, in consideration of the above and

   foregoing, the parties agree as follows:

     1. PAYMENT FROM PETTID TO WAGNER. Pettid agrees to transfer

   real and personal property and to pay Wagner, as full and

   complete settlement toward the claims in the Annulment Lawsuit

   and the Bartling Lawsuit, as follows:

     a) Real Estate Commonly Known As 972 South 4th

   Street. * * *

               * * * * * * *

     b) IRA. * * *

     c) Household Goods. * * *

     d) Dean Witter. * * *

     e) Insurance. * * *

               * * * * * * *

    ">*190  f) PERIODIC SUPPORT PAYMENTS. Commencing on December 1,

       1992, and continuing on the first (1st) day of each and

       every month thereafter, Pettid shall pay Wagner periodic

       support payments of Four Thousand and No/ 100 Dollars

       ($ 4,000.00) per month for a period of eighty-four (84)

       months.

     g) HOUSE ACCOUNT. * * *

              * * * * * * *

     i) Cash Payment. * * *

              * * * * * * *

     5. RELEASE. Wagner, in consideration of the compromise and

   settlement of her claim against Pettid, releases and forever

   discharges Pettid, his successors, legal representatives and

   assigns from all claims, demands and causes of action, including

   any arising in tort or contract, law or equity, that Wagner may

   now have or that might subsequently accrue to Wagner, known or

   unknown, arising out of or connected with, directly or

   indirectly, the marriage of the parties which took place on May

   8, 1982, in any way connected with the relationship of the

   parties. This release includes, but is not limited to, all

   claims and actions">*191 based on the allegations contained in the

   Bartling Lawsuit and the claims of an innocent spouse in the

   Annulment Lawsuit. This release shall forever settle, adjust and

   discharge all claims of Wagner against Pettid pertaining to the

   Bartling Lawsuit or the Annulment Lawsuit.

     Pettid, in consideration of the compromise and settlement

   of any claims he may have against Wagner, releases and forever

   discharges Wagner, her successors, legal representatives and

   assigns from all claims, demands and causes of action, including

   any arising in tort or contract, law or equity, known or

   unknown, that Pettid may now have or might subsequently accrue

   to Pettid arising out of or in any way associated therewith.

   This release shall forever settle, adjust and discharge any

   claims that Pettid may have against Wagner by virtue of said

   marriage and all elements relating thereto.

              * * * * * * *

     9. FULL AGREEMENT. This agreement represents the complete

   understanding of the parties and constitutes a full and final

   settlement of all claims or claims against the other, known or

  ">*192 unknown, without any reservation of any rights, either in law,

   equity, tort, contract, or in any other fashion, and may not be

   modified except in writing and signed by all of the parties.

     10. Binding Agreement. This agreement shall be binding upon

   the parties, their respective heirs, successors, administrators,

   assigns and personal representatives.

                * * * * * *

     13. WAIVER OF BREACH. No waiver of any breach by either

   party of the terms of this Agreement shall be deemed a waiver of

   any subsequent breach. No modification of this Agreement shall

   be binding upon either of the parties unless reduced to writing

   and subscribed by both parties, unless ordered by the Court.

The payments at issue in this case are the monthly payments made pursuant to paragraph 1.f) above.

[11] On the same day that the Annulment Agreement was executed, the district court entered a decree which annulled petitioner's marriage to Ms. Wagner. The district court found that petitioner was legally married to Ms. Wilma Rae Pettid at the time of his marriage to Ms. Wagner; therefore, the marriage of petitioner and Ms. Wagner">*193 was void as a matter of law. The district court stated that it had examined the Annulment Agreement and

   finds the same to be fair, just, reasonable and not

   unconscionable and hereby approves the same, which Agreement is

   not being filed with the Court, but shall be adhered to by all

   parties as though said * * * Agreement * * * were filed with the

   Court and set forth in its entirety in this Agreement; that in

   the event either party shall fail to abide by the terms of the

   * * * Agreement * * *, the aggrieved party may file said

   Agreement with the Court and be entitled to all relief which

   would otherwise be made available for the enforcement of a

   judgment, including contempt.

The district court further stated:

   IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * *

   [petitioner] and * * * [Ms. Wagner] shall each abide by and

   adhere to the terms and conditions of the * * * [Annulment]

   Agreement which has been reviewed by the Court and has been

   found to be fair, just, reasonable and not unconscionable, and

   which Agreement shall not be filed with the Court as provided

   for in Neb. Rev. Stat. sec. 42-366(4)(b)">*194 (Reissue 1988).

[12] Respondent issued a notice of deficiency to petitioner with respect to his 1993, 1994, and 1995 returns. The notice of deficiency sets forth the following explanation for the adjustment disallowing the deduction petitioner claimed for the payments made during 1993:

   Alimony Deduction:

   Payments totaling $ 48,000.00 which you made in the taxable year

   1993 to Inga Wagner, are not alimony payments, but are payments

   in settlement of a claim for damages. Accordingly, the payments

   are not deductible and your taxable income is increased

   $ 48,000.00.

The notice of deficiency contains identical explanations for taxable years 1994 and 1995.

OPINION

[13] The issue for decision is whether monthly payments made by petitioner to Ms. Wagner in each of the years in issue, pursuant to the Annulment Agreement, are properly characterized as deductible alimony under section 215(a), as petitioner contends, or as nondeductible payments in settlement of a claim for damages, as determined by respondent. Petitioner bears the burden of proving respondent's determination wrong. See Rule 142(a).

EVIDENTIARY ISSUES

[14] As a preliminary matter, we must decide">*195 respondent's objection to the introduction of 18 joint exhibits. Four of the joint exhibits relate to the divorce proceeding between petitioner and Ms. Wilma Rae Pettid. They are described as follows:

   5-E  Decree dissolving petitioner's marriage to Ms. Wilma Rae

     Pettid, issued by the District Court of Douglas County,

     Nebraska, on March 12, 1982.

   6-F  Property Settlement Agreement executed by and between

     petitioner and Ms. Wilma Rae Pettid.

   7-G  Answers to Interrogatories filed in the divorce proceeding.

   8-H  Affidavit RE: Application for Support, Fees, Custody, Etc.

     and Financial Statement, filed in the divorce proceeding.

Fourteen of the joint exhibits relate to the purported marriage of

and subsequent annulment proceeding between petitioner and Ms.

Wagner. They are described as follows:

   9-I  Marriage License issued to petitioner and Ms. Wagner on May

     5, 1982, by the Office of the County Judge for Douglas

     County, Nebraska.

  10-J  Excerpt from a record containing Ms. Wagner's testimony

     taken in a deposition in connection with the annulment

     proceeding.

   12-L">*196 Affidavit RE: Application for Support, Fees, Custody, Etc.

     and Financial Statement, filed by petitioner in the

     annulment proceeding.

   13-M Affidavit RE: Application for Support, Fees, Custody, Etc.

     and Financial Statement, filed by Ms. Wagner in the

     annulment proceeding.

   15-O Motion for temporary support filed by Ms. Wagner in the

     annulment proceeding.

   16-P Temporary Order issued by the District Court of Douglas

     County, Nebraska, in the annulment proceeding.

   17-Q Certificate of Readiness for Trial prepared by Ms. Wagner's

     attorney in the annulment proceeding.

   23-W Draft of the Settlement Agreement and Mutual Release.

   24-X Letter from petitioner's attorney to Ms. Wagner's attorney,

     dated February 24, 1992.

   25-Y Letter from petitioner's attorney to Ms. Wagner's attorney,

     dated October 6, 1992.

   26-Z Letter from Ms. Wagner's attorney to petitioner's attorney,

     dated October 19, 1992.

  27-AA Letter from petitioner's attorney to Ms. Wagner's attorney,

     dated November 3, 1992.

  28-AB Acknowledgment of Receipt and Release, ">*197 executed by Ms.

     Wagner on July 1, 1994, and filed on July 12, 1994.

  29-AC Ms. Wagner's Answer to Request for Admission, dated August

     11, 1992, executed in connection with the annulment

     proceeding.

[15] Respondent's counsel set forth his objection to the exhibits in paragraph 7 of the stipulation of facts and paragraph 55 of the supplement to stipulation of facts, which state as follows:

     7. Respondent also objects to admission into evidence of

   Joint Exhibits 5-E, 6-F, 7-G. 8-H, 9-I, 10-J, 12-L, 13-M, 15-O,

   16-P, 17-Q, 23-W, 24-X, 26-Z, 27-AA, and 28-AB on the grounds

   that the Annulment Agreement * * * represents the complete

   understanding of the parties and constitutes a full and final

   settlement of all claims or claims against the other, known or

   unknown, without any reservation of any rights, either in law,

   equity, tort, contract, or in any other fashion, and may not be

   modified except in writing and signed by all of the parties.

   Joint Exhibits 5-E, 6-F, 7-G, 8-H, 9-I, 10-J, 12-L, 13-M, 15-O,

   16-P, 17-Q, 23-W, 24-X, 26-Z, 27-AA, and 28-AB could not be

   admitted as parole [sic] evidence">*198 in an action between Pettid

   and Wagner to alter the construction of the Annulment Agreement

   or to show its unenforceability because of mistake, undue

   influence, fraud, duress, etc. Commissioner v. Danielson, 378 F.

   2d 771, 775 (3rd Cir. 1967). * * *

     55. In paragraph 7 of the Stipulation of Facts, Respondent

   objected to admission of several Joint Exhibits into evidence.

   Respondent continues to object to all of the Joint Exhibits

   listed in paragraph 7 of the Stipulation of Facts and now adds

   Joint Exhibits 25-Y and 29-AC. * * *

[16] Although nominally phrased in terms of the parol evidence rule, respondent's objection is based on the application of the court's holding in Commissioner v. Danielson, 378 F.2d 771">378 F.2d 771 (3d Cir. 1967), vacating and remanding 44 T.C. 549">44 T.C. 549 (1965). In that case, the taxpayers executed covenants not to compete and a purchase agreement in connection with their sale of stock. The documents specifically allocated a portion of the total consideration to the covenants not to compete. Nevertheless, on their tax returns, the taxpayers reported the entire amount received">*199 from the buyer as proceeds from the sale of stock. The taxpayers argued that the allocation of the buyer's consideration in the covenants not to compete and the purchase agreement had no basis in fact or economic reality and that taxation should be based on the substance of the transaction. In response to the taxpayers' argument, the Court of Appeals adopted the following rule:

   a party can challenge the tax consequences of his agreement as

   construed by the Commissioner only by adducing proof which in an

   action between the parties to the agreement would be admissible

   to alter that construction or to show its unenforceability

   because of mistake, undue influence, fraud, duress, etc. * * *

378 F.2d 771">378 F.2d at 775. This Court has not adopted the rule enunciated by the Court of Appeals for the Third Circuit in 378 F.2d 771">Commissioner v. Danielson, supra. See Norwest Corp. v. Commissioner, 111 T.C. 105">111 T.C. 105, 111 T.C. 105">142 (1998); Coleman v. Commissioner, 87 T.C. 178">87 T.C. 178, 87 T.C. 178">202 n. 17 (1986), affd. without published opinion 833 F.2d 303">833 F.2d 303 (3d Cir. 1987); Elrod v. Commissioner, 87 T.C. 1046">87 T.C. 1046, 87 T.C. 1046">1065 (1986);">*200 G.C. Servs. Corp. v. Commissioner, 73 T.C. 406">73 T.C. 406, 73 T.C. 406">412 n. 2 (1979).

[17] On brief, respondent's counsel expanded the basis for his objection to include two additional theories: The "strong proof" rule and the holding of Grummer v. Commissioner, 46 T.C. 674">46 T.C. 674 (1966). Under the "strong proof" rule, adopted by this Court, a taxpayer can ignore the unambiguous terms of a binding agreement only if the taxpayer presents "strong proof," that is, more than a preponderance of the evidence, "that the terms of the written instrument" do "not reflect the actual intention of the parties thereto." G. C. Servs. Corp. v. Commissioner, 73 T.C. 406">73 T.C. 412; Meredith Corp. & Subs. v. Commissioner, 102 T.C. 406">102 T.C. 406, 102 T.C. 406">440 (1994); Major v. Commissioner, 76 T.C. 239">76 T.C. 239, 76 T.C. 239">247 (1981). Similarly, the holding in Grummer v. Commissioner is stated as follows:

   extrinsic evidence designed to alter the language of a divorce



   decree or separation agreement will not be considered in



   determining whether payments constitute alimony or child support

   when the agreement of the parties">*201 specifically and unequivocally

   fixes the character of such payments. * * *

Grummer v. Commissioner, 46 T.C. 674">46 T.C. 680. In that case, the Court found "no ambiguity of the agreement." 46 T.C. 674">Id. at 679.

[18] The Danielson rule, the "strong proof" rule, and the Grummer holding all relate to the same issue: whether a party to a binding agreement should be permitted to avoid the tax consequences that would otherwise flow from the unambiguous terms of the agreement. The Danielson rule and the "strong proof" rule differ in the level of proof necessary to challenge the tax consequences of an agreement. The Grummer case adopts a rule prohibiting consideration of extrinsic evidence in interpreting the unambiguous language of a divorce decree or separation agreement.

[19] None of the three theories relied upon by respondent apply to the instant case. All three theories apply only in the case of an unambiguous agreement. However, we find paragraph 1.f) of the Annulment Agreement to be ambiguous because it does not state whether, or to what extent, the "periodic support payments" are in settlement of a claim for damages under the Bartling lawsuit">*202 or are payments in connection with the annulment of petitioner's purported marriage to Ms. Wagner. Paragraph 1 of the Annulment Agreement states that the transfers of property and payments are in "full and complete settlement toward the claims in the Annulment Lawsuit and the Bartling Lawsuit."

[20] Petitioner is not attempting to alter the unambiguous terms of the Annulment Agreement and, thus, avoid the tax consequences that flow from this Agreement. Rather, by introducing the joint exhibits into evidence, petitioner seeks to produce evidence contrary to respondent's position that the subject payments are "in settlement of a claim for damages" (i.e., the Bartling lawsuit) and to prove that the parties to the Annulment Agreement intended the "periodic support payments" to qualify as "alimony or separate maintenance." Accordingly, we overrule respondent's objection to the joint exhibits.

[21] Respondent also objects to paragraph 6 of the stipulation of facts and paragraph 53 of the supplement to stipulation of facts, relating to respondent's treatment of the payments received by Ms. Wagner. Paragraph 6 of the stipulation of facts states in pertinent part as follows:

     6. ">*203 Pettid (i.e. Petitioner) asserts that for the same

   three tax years [1993, 1994, and 1995], the Commissioner * * *

   determined that the same $ 4,000.00 monthly payments that

   Pettid made to Wagner were alimony includable in her gross

   income. * * *

Paragraph 53 of the supplement to stipulation of facts

provides in pertinent part as follows:

     53. On November 27, 1996, Respondent issued a notice of

   deficiency to Inga Wagner, for tax years 1993 and 1994, in which

   Respondent determined that Inga Wagner was liable for tax on the

   payments she received from Petitioner, Fred J. Pettid, in

   response to paragraph 1.f) of the Annulment Agreement. * * *

Respondent objects to the above-quoted statements on the ground that the determinations made by the Commissioner with respect to the treatment of the payments in Ms. Wagner's returns are not probative as to the treatment of the payments in petitioner's returns.

[22] Petitioner did not address respondent's objection on brief, and, thus he has conceded it. See Lime Cola Co. v. Commissioner, 22 T.C. 593">22 T.C. 593, 22 T.C. 593">606 (1954) (stating that because petitioners did not address transferee">*204 liability on brief, petitioners had conceded the issue); Levert v. Commissioner, T.C. Memo 1989-333 (stating that respondent had conceded the taxpayer's liability for an addition to tax that was determined in the notice of deficiency by failing to discuss the issue on brief). Accordingly, we sustain respondent's objection to the admission of paragraph 6 of the stipulation of facts and paragraph 53 of the supplement to stipulation of facts.

Alimony or Separate Maintenance

[23] The principal issue in this case is whether the payments made by petitioner to Ms. Wagner are properly characterized as "alimony or separate maintenance payments," deductible under section 215(a). Section 215(b) provides that the term "alimony or separate maintenance payment" means "any alimony or separate maintenance payment (as defined by section 71(b)) which is includible in the gross income of the recipient under section 71." Section 71(b) provides as follows:

     SEC. 71(b). Alimony or Separate Maintenance Payments

   Defined. -- For purposes of this section --

        (1) In General. -- The term "alimony or separate

     maintenance payment" means any ">*205 payment in cash if --

          (A) such payment is received by (or on behalf of)

        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

        includible in gross income under this section and not

        allowable as a deduction under section 215,

          (C) in the case of an individual legally

        separated from his spouse under a decree of divorce or

        of separate maintenance, the payee spouse and the

        payor spouse are not members of the same household at

        the time such payment is made, and

          (D) there is no liability to make any such

        payment for any period after the death of the payee

        spouse and there is no liability to make any payment

        (in cash or property) as a substitute for such

        payments after the death of the payee spouse.

If the payments made by petitioner fail to meet each of the four criteria enumerated by section 71(b)(1), then the payments are not "alimony">*206 or separate maintenance payments" and are not deductible by petitioner under section 215(a).

[24] As stated in respondent's reply brief, "Both petitioner and respondent agree that payments made by petitioner meet the requirements contained in I.R.C. sec. 71(b)(1)(A), (B), and (C)." Therefore, the sole question remaining is whether the subject payments satisfy the requirements of subparagraph (D).

[25] Respondent takes the position that the requirements of subparagraph (D) are not satisfied for the following two reasons: "First, there is no reference in the Annulment Agreement which requires the termination of the support payments upon Wagner's death. Second, there appears to be a specific requirement in the agreement for Pettid to continue the payments should Wagner die."

[26] Contrary to respondent's first position, we conclude that petitioner's liability to make payments under paragraph 1.f) of the Annulment Agreement terminates upon the death of Ms. Wagner by operation of Neb. Rev. Stat. section 42-365, which provides as follows:

   Decree; alimony; division of property; criteria; modification;

   revocation; termination. When dissolution of marriage is

   decreed, the ">*207 court may order payment of such alimony by one

   party to the other and division of property as may be

   reasonable, having regard for the circumstances of the parties,

   duration of the marriage, a history of the contributions to the

   marriage by each party * * * and interruption of personal

   careers or educational opportunities * * * EXCEPT AS OTHERWISE

   AGREED BY THE PARTIES IN WRITING OR BY ORDER OF THE COURT,

   ALIMONY ORDERS SHALL TERMINATE UPON THE DEATH OF EITHER PARTY OR

   THE REMARRIAGE OF THE RECIPIENT.

     The purpose of alimony is to provide for the continued

   maintenance or support of one party by the other when the

   relative economic circumstances and the other criteria

   enumerated in this section make it appropriate. [Emphasis

   added.]

Neb. Rev. Stat. sec. 42-365 (1988).

[27] Neb. Rev. Stat. section 42-365 provides that the payor's liability to make payments under "alimony orders" terminates by operation of law upon the death of either spouse or the remarriage of the recipient spouse, "except as otherwise agreed by the parties in writing or by order of the court". We note that respondent does not argue that the district">*208 court's decree is not an "alimony order." In this case, neither the Annulment Agreement nor the Decree of Annulment provides for the termination of the payments required under paragraph 1.f) of the Agreement. Thus, petitioner's liability to make the payments terminates by operation of Neb. Rev. Stat. section 42- 365 upon Ms. Wagner's death.

[28] Under Nebraska law, there is a distinction between "annulment" and "divorce". Annulment is the declaration by a court that a purported marriage is null and void, as if the marriage had not occurred. See Neb. Rev. Stat. sec. 42-119 (1988). Divorce is the termination of a valid and binding marriage. See Neb. Rev. Stat. sec. 42-347(2) (1988). Notwithstanding this distinction, annulment actions are brought in the same manner as divorce actions and are subject to the same provisions of the Nebraska Divorce and Alimony Law. See Neb. Rev. Stat. sec. 42-373 (1988).

[29] Our interpretation of Neb. Rev. Stat. section 42-365 is supported by the holding in Euler v. Euler, 207 Neb. 4">207 Neb. 4, 295 N.W.2d 397">295 N.W.2d 397 (Neb. 1980). The issue in Euler v. Euler was whether, under Neb. Rev. Stat. section 42-365, the remarriage of the ex-wife caused the termination">*209 of the payment of alimony to her. The court held that:

   Neither the property settlement nor the decree provides for the



   termination of alimony upon the occurrence of a specified event



   set out in the agreement, nor does either state that the



   agreement shall not be subject to amendment or revision. SECTION



   42-365 CLEARLY STATES THAT ALIMONY PAYMENTS WILL TERMINATE BY



   OPERATION OF LAW WHEN A DECREE IS SILENT ON THE EFFECT OF DEATH

   OR REMARRIAGE. [Emphasis added.]

295 N.W.2d 397">295 N.W.2d at 400.

[30] Respondent attempts to distinguish Euler v. Euler by noting that the agreement in that case expressly permitted modification. Respondent argues that the court in Euler v. Euler concluded that termination language could be added to the agreement. In this case, on the other hand, respondent argues that the Annulment Agreement does not permit modification, and that language terminating petitioner's liability to make the subject payments upon the death of Ms. Wagner cannot be added.

[31] We disagree. We do not agree that the statutory direction set forth in Neb. Rev. Stat. section 42-365 can be defeated by a general contractual provision prohibiting">*210 modification of the agreement. If Neb. Rev. Stat. section 42-365 applies, a payor's liability to pay alimony terminates automatically by operation of law upon the death of the payee. As the court stated in Kingery v. Kingery:

   The words, "terminate upon the death of either party or the

   remarriage of the recipient," clearly show that this portion of

   the statute needs no order of court to effect termination. The

   alimony terminates by operation of law when the condition

   occurs.

Kingery v. Kingery, 211 Neb. 795">211 Neb. 795, 320 N.W.2d 441">320 N.W.2d 441, 320 N.W.2d 441">443 (Neb. 1982). Thus, if Neb. Rev. Stat. section 42-365 applies, liability to make the payments terminates without a court order. Similarly, the termination takes place without "modification" of the Annulment Agreement or the Decree of Annulment.

[32] Respondent cites Watters v. Foreman, 204 Neb. 670">204 Neb. 670, 284 N.W.2d 850">284 N.W.2d 850 (Neb. 1979), in support of his position that section 71(b)(1)(D) is not satisfied because paragraph 1.f) of the Annulment Agreement does not explicitly provide for termination of the subject support payments upon the death or remarriage of Ms. Wagner. The issue in 204 Neb. 670">Watters v. Foreman, supra,">*211 was whether the remarriage of the payee spouse resulted in the termination of alimony by operation of Neb. Rev. Stat. section 42-365. The court decree stated that the payments would cease upon the payee's death, but it was silent about remarriage.

[33] In support of his position that his obligation to pay alimony terminated upon his ex-wife's remarriage, the payor, Foreman, argued that Neb. Rev. Stat. section 42-365 required termination of the alimony payments upon the remarriage of his ex-wife. The court in 204 Neb. 670">Watters v. Foreman, supra, held:

   Where the parties by their agreement in writing, or the court by



   its decree, provide that a specific amount of alimony shall be



   paid for a specific period of time, and shall terminate only



   upon the occurring of a specific event set out in the agreement



   or decree and otherwise shall not be subject to amendment or



   revision, the payments of such alimony shall terminate only upon

   the happening of the event set out in the agreement or decree.

284 N.W.2d 850">284 N.W.2d at 854.

[34] Respondent notes that in 204 Neb. 670">Watters v. Foreman, supra, the parties to the written">*212 agreement did not include the remarriage of the ex-wife as a ground for termination, and the agreement stated that it was final and complete and not subject to revision or amendment. According to respondent, the same result should follow in the instant case because the Annulment Agreement likewise does not include the death of Ms. Wagner as a ground for termination and states that it is final and complete and not subject to revision or modification.

[35] We believe that 204 Neb. 670">Watters v. Foreman, supra, is distinguishable from the instant case. In 204 Neb. 670">Watters v. Foreman, supra, the decree fit within the "Except as otherwise agreed by the parties in writing or by order of the court" language of Neb. Rev. Stat. section 42-365 because the decree expressly dealt with termination and provided that termination would occur upon the death of the payee spouse. In the instant case, on the other hand, the Annulment Agreement is silent about termination and is silent about the effect that the death or remarriage of Ms. Wagner will have on the payments required under paragraph 1.f). Thus, the parties to the Annulment Agreement have not "otherwise agreed" ">*213 in writing regarding the effect of the death or remarriage of Ms. Wagner on petitioner's liability to make payments under paragraph 1.f). In such a case, by operation of Neb. Rev. Stat. section 42-365, the payments automatically terminate upon the death of petitioner or of Ms. Wagner or remarriage of Ms. Wagner.

[36] Respondent further argues that section 71(b)(1)(D) is not satisfied because petitioner, or his estate "may be required to make payments [under the Annulment Agreement] after Ms. Wagner's death." To support this argument respondent makes three points. First, respondent notes that paragraph 10 of the Annulment Agreement provides: "This Agreement shall be binding upon the parties, their respective heirs, successors, administrators, assigns and personal representatives." Second, respondent argues that, because the Annulment Agreement provides that it cannot be modified, it is equivalent to a judgment on which Ms. Wagner's heirs could bring an action. Third, respondent asserts that "the Annulment Agreement is a settlement of the Bartling Lawsuit", a "tort suit," and the payments in issue "are simply the periodic payment of a damage award" that could be enforced against petitioner">*214 by Ms. Wagner's heirs.

[37] Unlike respondent, we do not believe that any provision of the Annulment Agreement or the Decree of Annulment requires petitioner to continue making the monthly payments under paragraph 1.f) of the Agreement after Ms. Wagner's death. As to the first and second points raised by respondent, we do not agree that the "binding agreement" provision or the "no modification" provision of the Annulment Agreement can be read so broadly as to require the payments to continue after Ms. Wagner's death or to constitute an agreement of the parties that the alimony order will not terminate on Ms. Wagner's death, as otherwise required by Neb. Rev. Stat. section 42-365.

[38] We also disagree with respondent's third point, that the Annulment Agreement is a settlement of the Bartling lawsuit, a tort action, and the payments in issue are periodic payments of a damage award that could be enforced by Ms. Wagner's heirs. While we agree that the Bartling lawsuit was settled in the Annulment Agreement, we do not agree that it was necessarily a tort action or that the subject payments relate to an award of damages.

[39] Accordingly, by operation of Neb. Rev. Stat. section 42- 365, ">*215 the payments described by paragraph 1.f) of the Annulment Agreement terminate upon the death of Ms. Wagner. Thus, the payments constitute "alimony" under section 71(b) because "there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse" as required by section 71(b)(1)(D). Therefore, we find that the subject payments constitute "alimony or separate maintenance payments" within the meaning of section 71(b) and are deductible under section 215(a).

[40] To reflect the foregoing,

[41] Decision will be entered under Rule 155.