Webb v. Comm'r , 2007 Tax Ct. Summary LEXIS 94 ( 2007 )

T.C. Summary Opinion 2007-91
UNITED STATES TAX COURT
DANIEL WAYNE WEBB, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19848-05S. Filed June 4, 2007.
Daniel Wayne Webb, pro se.
Fred E. Green, Jr., for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect when the petition was filed.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case.
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2002.
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Respondent determined a deficiency in petitioner’s Federal
income tax for 2002 of $7,504. The deficiency stemmed from the
disallowance of a deduction for alimony payments and the
subsequent adjustment of petitioner’s itemized deductions. The
parties have asked us to decide whether petitioner properly
deducted $24,000 that was voluntarily paid to his ex-wife in 2002
as alimony.2 We hold that the payments at issue were properly
deductible as alimony under section 215(a) and consequently hold
for petitioner.
Background
Some of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits.
At the time the petition was filed, Daniel Wayne Webb
(petitioner) resided in Reno, Nevada.
Petitioner and Jeanette Webb were married in October 1974
and divorced in October 1987. It was a “messy” divorce, and at
least one temporary restraining order was issued against Jeanette
Webb (ex-wife). Petitioner ended up with custody of the
children.
In addition to provisions regarding petitioner’s then-minor
children, the Statement of Decision issued by the Superior Court
2
As the issue for decision under these facts is
essentially legal in nature, we decide the instant case without
regard to the burden of proof.
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of California for the County of Los Angeles (the Superior Court)
in November 1987 provided for spousal support to be paid to
petitioner’s ex-wife. Over the years the Superior Court issued
various orders related to the dissolution of petitioner’s
marriage to his ex-wife, modifying provisions regarding, inter
alia, spousal support, as was deemed necessary.
In July 2000, the Superior Court issued a Stipulation Re:
Spousal Support; Order Thereon (the Superior Court’s Order). The
Superior Court’s Order outlined obligations with respect to
future spousal support payments made by petitioner to his ex-
wife, including a requirement that she declare any payments as
income on her Federal and State income tax returns, as well as
the requirement that petitioner furnish his ex-wife with a proper
accounting of all support payments made in a given tax year no
later than January 31 of the following year. The Superior
Court’s Order also specified that there was no legally actionable
duty on petitioner’s part to make any payments. The Superior
Court’s Order was signed by both petitioner and his ex-wife, and
it was signed by a judicial officer of the State of California on
July 24, 2000. It was the Superior Court’s Order that was in
effect for the taxable year 2002.
Petitioner paid his ex-wife $2,000 per month in 2002 as
spousal support. He made these payments out of concern for his
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children’s welfare.3 Both petitioner and his ex-wife complied
with their obligations as set forth in the Superior Court’s
Order.
Discussion
Section 71(a) provides the general rule that alimony
payments are included in the gross income of the payee spouse;
section 215(a) provides the complementary general rule that
alimony payments are tax deductible by the payor spouse in “an
amount equal to the alimony or separate maintenance payments paid
during such individual’s taxable year.”
The term “alimony” means any alimony as defined in section
71, which provides in relevant part:
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 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 * * * and not
allowable as a deduction under section 215,
3
Petitioner described his ex-wife as periodically
suffering from mental instability and explained that, but for
these alimony payments, there was a real concern that his
children’s mother--with whom his children had regular visitation
--would be rendered homeless, thereby negatively impacting his
children.
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(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.
Both parties agree that petitioner’s payments to his ex-wife
satisfied the requirements set out in section 71(b)(1)(B), (C),
and (D). The parties do not agree, however, on whether the
payments satisfy the requirement that the payments be made under
a divorce or separation instrument. See sec. 71(b)(1)(A).
Section 71(b)(2) provides that a “divorce or separation
instrument” means:
(A) a decree of divorce or separate
maintenance or a written instrument incident
to such a decree,
(B) a written separation agreement, or,
(C) a decree (not described in
subparagraph (A)) requiring a spouse to make
payments for the support or maintenance of
the other spouse.
As a general matter, if the language of a statute is
unambiguous on its face, we apply the statute in accordance with
its terms. See, e.g., Garber Indus. Holding Co. v. Commissioner,
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124 T.C. 1 (2005), affd. 435 F.3d 555 (5th Cir. 2006). Section
71 is not a tremendously complicated statute, and its
requirements are clearly set forth. The operative order in
effect for 2002 was a written instrument incident to the divorce
decree that dissolved petitioner’s marriage to his ex-wife.
Because the Superior Court’s Order was a written instrument
incident to a divorce decree, it thus meets the definition of a
divorce or separation instrument under section 71(b)(2)(A).
Despite the fact that petitioner falls within the provisions
of the applicable statute, respondent argues that because
petitioner did not have a legally enforceable duty to make
spousal support payments in 2002, petitioner’s payments to his
ex-wife in 2002 were not made pursuant to a divorce or separation
instrument.4 But, as petitioner rightly argues, there is no
requirement in the statute that payments be made under a legally
enforceable duty in order to qualify for the alimony deduction;
the only requirement is that any payment be “received by (or on
behalf of) a spouse under a divorce or separation instrument”.
Sec. 71(b)(1)(A). Although it was once the case that entitlement
to an alimony deduction under section 71 required payments to be
4
Respondent does not allege that the payments at issue
were disguised child support payments or installments of a
property distribution; rather, his sole argument is that
petitioner’s payments to his ex-wife did not constitute alimony
because they did not meet its definition under the statute.
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made under a legally enforceable obligation, it has not been so
for more than 20 years.
Prior to the Deficit Reduction Act of 1984, Pub. L. 98-369,
sec. 422(a), 98 Stat. 795, section 71(a)(1) of the Internal
Revenue Code of 1954 defined alimony as payments made “in
discharge of * * * a legal obligation which, because of the
marital or family relationship, is imposed on or incurred by the
husband under the [divorce] decree or under a written instrument
incident to * * * divorce or separation.” The statute was
amended in 1984, repealing the “requirement that the payment be
based on a legal support obligation.” H. Rept. 98-432 (Part 2)
at 1069 (1984).
The cases cited by respondent in support of his position are
cases decided under the old law, or are the progeny of older
cases containing no independent analysis reflective of the
changes to the statute. Although there certainly have been cases
holding that voluntary payments made outside a written instrument
incident to divorce are not alimony, those cases have generally
dealt with situations where there was no proper divorce decree or
separation agreement, where a payment was made before the
operative document went into effect, or where the older version
of section 71 applied to the particular case. See, e.g., Herring
v. Commissioner, 66 T.C. 308, 311 (1976) (holding that payments
made under an oral agreement were not alimony because they were
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made before the issuance of the divorce decree); Taylor v.
Commissioner, 55 T.C. 1134, 1140 (1971) (applying the old version
of section 71 and concluding that, “absent some sort of currently
enforceable judicial decree or order”, section 71 would not
apply); Leventhal v. Commissioner, T.C. Memo. 2000-92 (stating
that letters from one spouse’s attorney to another do not
constitute a divorce or separation instrument); Peterson v.
Commissioner, T.C. Memo. 1998-27 (confirming that a California
State court’s issuance of a Minute Order was sufficient under
State law to constitute a “divorce or separation instrument”);
Abood v. Commissioner, T.C. Memo. 1990-453 (applying the pre-
amendment version of section 71 to the facts and clarifying that,
under those circumstances, “voluntary payments are not within the
purview of sections 71 and 215”). This is true even of recent
cases. See, e.g., Johnson v. Commissioner, 441 F.3d 845, 850
(9th Cir. 2006) (affirming the Tax Court’s holding that the prior
version of section 71 applied). There have been no cases firmly
on point with the one at bar.
Respondent’s own regulations support petitioner’s position.
Although section 1.71-1, Income Tax Regs., contains the
antiquated language reflective of the older version of the
alimony statute, see sec. 1.71-1(b), Income Tax Regs. (“Such
periodic payments must be made in discharge of a legal obligation
imposed upon or incurred by the husband because of the marital or
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family relationship”), the temporary regulation promulgated along
with the amended version of section 71 in 1984 reflects the
changes to the statutory language.5 The more recent regulation
requires only that alimony payments meet the following
requirements: (a) That payments be made in cash; (b) that
payments not be designated as excludible from the gross income of
the payee and nondeductible by the payor; (c) that payments be
made between spouses who are not members of the same household;
(d) that the payor has no liability to continue to make payments
after the death of the payee spouse; and (e) that payments are
not treated as child support. Sec. 1.71-1T, Q&A-2, Temporary
Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984). Further,
section 1.71T, Q&A-3, Temporary Income Tax Regs., makes very
clear that “the [requirement] that alimony or separate
maintenance payments be * * * made in discharge of a legal
obligation * * * [has] been eliminated.” Accordingly,
petitioner’s 2002 payments satisfy the requirements for alimony
payments as outlined in the relevant regulations.
More than 20 years after the enactment of the amended
statute, there is no reason to assume that Congress meant
anything other than what it said in enacting the present version
5
Temporary regulations are entitled to the same weight as
final regulations. See Peterson Marital Trust v. Commissioner,
102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d Cir. 1996); Truck
& Equip. Corp. v. Commissioner, 98 T.C. 141, 149 (1992).
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of section 71. It is not the Court’s place to support
respondent’s attempt to include language Congress itself did not.
Accordingly, we hold that, under the unique facts of this
case, petitioner’s payments made to his ex-wife in 2002 satisfied
the conditions set forth in section 71 and were thus properly
deductible as alimony for that taxable year.
To reflect our disposition of the disputed issue, as well as
respondent’s concession,
Decision will be entered
for petitioner.