DocketNumber: Nos. 4467-06, 7221-06
Citation Numbers: 2008 T.C. Memo. 17, 95 T.C.M. 1084, 2008 Tax Ct. Memo LEXIS 18
Judges: \"Chiechi, Carolyn P\"
Filed Date: 1/31/2008
Status: Non-Precedential
Modified Date: 11/20/2020
MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI, Judge: Respondent determined the following deficiencies in, and accuracy-related penalties under
Petitioners | Deficiency | Accuracy-Related Penalty |
Dwight S. Platt and | $ 3,531 | $ 706 |
Antonina K. Platt | ||
Herbert Bangs and | 2,175 | 435 |
Christine Bangs |
We must decide whether certain payments that petitioner Herbert Bangs (Mr. Bangs) made during 2002 to petitioner Antonina Platt (Ms. Platt) are deductible or excludable from Mr. Bangs' income for his taxable year 2002 and includible in Ms. Platt's income for her taxable year 2002. 2*19 We hold that they are not.
FINDINGS OF FACT
All of the facts in these cases, which the parties submitted under
Petitioners in the case at docket No. 4467-06, Ms. Platt and Dwight Platt (Mr. Platt), resided in Stevenson, Maryland, at the time they filed the petition in that case. Petitioners in the case at docket No. 7221-06, Mr. Bangs and Christine Bangs (Ms. Bangs), resided in Ruxton, Maryland, at the time they filed the petition in that case.
On a date not disclosed by the record, Mr. Bangs and Ms. Platt were married. At all relevant times, including while Mr. Bangs was married to Ms. Platt, Mr. Bangs participated in a pension plan (Baltimore County pension plan) maintained by his employer, Baltimore County, Maryland. At those times, that was the only pension plan in which Mr. Bangs participated.
On March 2, 1983, Mr. Bangs and Ms. Platt divorced pursuant to a decree of divorce (divorce decree) issued by the Circuit Court for Baltimore County. The divorce decree provided in pertinent *20 part: IT IS FURTHER ORDERED, that the Defendant shall pay to the Plaintiff, directly, as permanent alimony, the sum of Three Hundred Dollars ($ 300) per month effective October 1, 1982, payable until the death of either party or the remarriage of the Plaintiff, whichever shall first occur, subject to the further order of the Court. IT IS FURTHER ORDERED, that the Defendant shall pay to the Plaintiff, as a monetary award, the sum of Thirty-Two Thousand Nine Hundred Dollars ($ 32,900), which sum shall be payable within 90 days of February 1, 1983. [3] IT IS FURTHER ORDERED, that the aforesaid monetary award shall be reduced to judgment on May 1, 1983 and shall draw interest at the legal rate from such date. * * * * IT IS FURTHER ORDERED, that with respect to the Defendant's pension, the Defendant shall pay to the Plaintiff, if, as, and when he receives each pension payment, that sum which is determined in accordance with the following formula: 50 percent X (12 years and seven months of marriage / by total years of employment). 4 IT IS FURTHER ORDERED, that if the Defendant voluntarily takes his pension as a lump sum, either before or after retirement, then Defendant shall, upon receipt of *21 * * * said lump sum, pay to the Plaintiff the sum of Twenty-two Thousand Five Hundred Dollars ($ 22,500), with simple interest at the rate of ten (10) percent from July 1, 1983, to the date of payment. [Reproduced literally.]
During 2002, Mr. Bangs received monthly payments from the Baltimore County pension plan. Pursuant to the divorce decree provision in question, shortly after receiving each such monthly payment, Mr. Bangs made the following monthly payments totaling $ 8,803.87 5*22 (monthly payments at issue) on the dates indicated by electronic transfers from a joint checking account that he and Ms. Bangs maintained to a checking account of Ms. Platt:
Date of Payment | Amount of Payment |
01/14/2002 | $ 728.91 |
02/13/2002 | 728.91 |
03/13/2002 | 728.91 |
04/15/2002 | 728.91 |
05/13/2002 | 728.91 |
06/13/2002 | 728.91 |
07/15/2002 | 728.91 |
08/15/2002 | 740.30 |
09/16/2002 | 740.30 |
10/15/2002 | 740.30 |
11/15/2002 | 740.30 |
12/16/2002 | 740.30 |
Mr. Bangs and Ms. Bangs timely filed Form 1040, U.S. Individual Income Tax Return (Form 1040), for their taxable year 2002 (Mr. Bangs' return). 6 In that return, Mr. Bangs claimed a deduction of $ 8,883 7 for alimony. Mr. Bangs did not issue to Ms. Platt and did not file with the Internal Revenue Service any Form 1099 for a nominee distribution with respect to those payments.
On January 18, 2006, respondent issued to Mr. Bangs a notice of deficiency with respect to his taxable year 2002 (notice for Mr. Bangs' *23 taxable year 2002). In that notice, respondent disallowed the alimony deduction that Mr. Bangs claimed in Mr. Bangs' return. In the notice for Mr. Bangs' taxable year 2002, respondent also determined that Mr. Bangs is liable for his taxable year 2002 for the accuracy-related penalty under
Mr. Platt and Ms. Platt timely filed Form 1040 for their taxable year 2002. 8 In that return, Ms. Platt did not include in income the $ 8,803.87 9 that she received from Mr. Bangs during 2002.
On January 18, 2006, respondent issued to Ms. Platt a notice of deficiency with respect to her taxable year 2002 (notice for Ms. Platt's taxable year 2002). In that notice, respondent determined that Ms. Platt received $ 8,883 10 of alimony that is includible in her income for that year. In the notice for Ms. Platt's taxable year 2002, respondent also determined that Ms. Platt is liable for her taxable year 2002 for the accuracy-related penalty under
OPINION
The parties submitted these cases fully stipulated under
In support of his argument that the monthly payments at issue are deductible or excludable from his income and includible in Ms. Platt's income for the taxable year 2002, Mr. Bangs advances several arguments. We first address Mr. Bangs' argument that the monthly payments at issue constitute alimony under
In advancing their respective positions on brief as to whether the monthly payments at issue constitute alimony under
Amended
In his reply brief, Mr. Bangs argues that
The Circuit Court for Baltimore County issued the divorce decree on March 2, 1983. The record does not establish that that court modified that decree after that date. On the record before us, we hold that
In his reply brief, Mr. Bangs states: "We would agree that if the pre-Tax Reform Act of 1984 version of
We turn now to Mr. Bangs' argument that Ms. Platt was the owner of an interest in the Baltimore County pension plan *28 since the divorce decree ordered him to pay her "if, as, and when he receives each pension payment, that sum which is determined in accordance with the following formula: 50 percent X (12 years and seven months of marriage / by total years of employment)." As a result, according to Mr. Bangs, the monthly payments at issue are excludable from his income and includible in Ms. Platt's income for the taxable year 2002. Ms. Platt and respondent argue that Ms. Platt did not own an interest in the Baltimore County pension plan. 16 As a result, according to Ms. Platt and respondent, the monthly payments at issue are includible in Mr. Bangs' income and excludable from her income for the taxable year 2002.
Petitioners in each of these cases agree, and respondent does not dispute, that the Baltimore County pension plan constitutes a qualified pension plan within the meaning of
In
A question arises as to whether the definition of the term "distributee" in
The parties do not dispute *35 (1) that during the year at issue Mr. Bangs, and not Ms. Platt, was a participant under the Baltimore County pension plan and (2) that during that year Ms. Platt was not a beneficiary of an interest in that pension plan. We thus consider only the parties' disagreement over whether Ms. Platt was the owner of an interest in the Baltimore County pension plan.
In support of their respective positions as to whether Ms. Platt was the owner of an interest in the Baltimore County pension plan, the parties rely on the divorce decree provision in question. That provision requires Mr. Bangs to pay an amount determined pursuant to a formula stated therein "if, as, and when" he receives a payment from the Baltimore County pension plan. Contrary to Mr. Bangs' argument, the divorce decree provision in question does not provide that Ms. Platt is the owner of an interest in that plan. 23*36 Nor has that provision been construed to do so. In fact, the Court of Special Appeals of Maryland concluded that the divorce decree provision in question granted nothing more than a monetary award to Ms. Platt. See
In
The Court of Special Appeals of Maryland agreed with Mr. Bangs that the payments ordered under the divorce decree $ 32,900 lump-sum payment provision and under the divorce decree provision in question were in the nature of a monetary award,
The law of Maryland in effect at the time that the Circuit Court for Baltimore County issued the divorce decree involved in the instant cases provides further support for our finding that the divorce decree provision in question does not provide that Ms. Platt is the owner of an interest in the Baltimore County pension plan. 26 The law of Maryland in effect at that time,
On the record before us, we find that Ms. Platt was not the owner of an interest in the Baltimore County pension plan. On that record, we further find that, regardless of whether in the context of a governmental plan, such as the qualified pension plan involved in the instant cases, the term "distributee" in
The final argument that Mr. Bangs advances in support of his position in these cases and that we consider now is that the divorce decree involved in these cases qualifies under
We reject Mr. Bangs' argument that the divorce decree qualifies under
The Circuit Court for Baltimore County issued the divorce decree involved in the instant cases on March 2, 1983. On the record before us, we hold that
Based upon our examination of the entire record before us, we find that the monthly payments at issue are not deductible or excludable from Mr. Bangs' income and are not includible in Ms. Platt's income for the taxable year 2002. 33*46
We have considered all of the parties' respective contentions and arguments that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot.
1. Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect for the year at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Respondent made certain additional determinations in the respective notices of deficiency that respondent issued to petitioners in these cases, the resolution of which flows automatically from our resolution of the determinations in those respective notices that we address herein. See also
3. We shall refer to the second-ordered paragraph quoted above as the divorce decree $ 32,900 lump-sum payment provision.↩
4. We shall refer to the fourth-ordered paragraph quoted above as the divorce decree provision in question.↩
5. The parties stipulated that during 2002 Mr. Bangs paid to Ms. Platt $ 8,883 pursuant to the divorce decree provision in question. That stipulation is clearly contrary to the facts that we have found are established by the record, and we shall disregard it. See
6. For convenience, we shall generally refer hereinafter only to Mr. Bangs, and not to Ms. Bangs.↩
7. See
8. For convenience, we shall generally refer hereinafter only to Ms. Platt, and not to Mr. Platt.↩
9. See
10. See
11. The parties do not address
12. Respondent in each of these cases is in essence a stakeholder. On brief, however, respondent agrees with Ms. Platt's position.↩
13. DEFRA also amended
14. In his reply brief, Mr. Bangs also argues that amended
In her reply brief, Ms. Platt does not address respondent's argument that
15. See
16. See
17. (a) Requirements for Qualification. -- A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section -- (1) if contributions are made to the trust by such employer, or employees, or both * * * for the purpose of distributing to such employees or their beneficiaries the corpus and income of the fund accumulated by the trust in accordance with such plan; (2) if under the trust instrument it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees and their beneficiaries under the trust, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees or their beneficiaries * * *
18.
19. Instead, in support of their respective positions as to whether the monthly payments at issue are excludable from Mr. Bangs' income and includible in Ms. Platt's income for the taxable year 2002, the parties rely on
20. All references hereinafter to the spendthrift provisions are to the provisions of
21. The rationale on which the Court based its holding in
The legislative history of the QDRO provisions enacted in 1984 states in pertinent part: Generally, under present law, benefits under a pension, profit-sharing, or stock bonus plan (pension plan) are subject to prohibitions against assignment or alienation (spendthrift provisions. [sic]) * * * Several cases have arisen in which courts have been required to determine whether the * * * spend-thrift provisions apply to family support obligations ( * * * * The committee believes that the spendthrift rules should be clarified by creating a limited exception that permits benefits under a pension, etc., plan to be divided under certain circumstances. In order to provide rational rules for plan administers [sic], the committee believes it is necessary to establish guidelines for determining whether the exception to the spendthrift rules applies. * * *
22. In
23. As discussed
24. The divorce decree $ 32,900 lump-sum payment provision provided: IT IS FURTHER ORDERED, that the Defendant shall pay to the Plaintiff, as a monetary award, the sum of Thirty-Two Thousand Nine Hundred Dollars ($ 32,900), which sum shall be payable within 90 days of February 1, 1983.↩
25. The divorce decree provision in question provided: IT IS FURTHER ORDERED, that with respect to the Defendant's pension, the Defendant shall pay to the Plaintiff, if, as, and when he receives each pension payment, that sum which is determined in accordance with the following formula: 50 percent X (12 years and seven months of marriage / by total years of employment).↩
26. As discussed
27. The law of Maryland in effect at the time that the Circuit Court for Baltimore County issued the divorce decree involved in the instant cases, * * * * (b) The court shall determine the value of all marital property. After making the determination, the court may grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded. * * *
In
28. (a)(1) * * * after the court determines which property is marital property, and the value of the marital property, the court may transfer ownership of an interest in property described in paragraph (2) of this subsection, grant a monetary award, or both, as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded. (2) The court may transfer ownership of an interest in: (i) a pension, retirement, profit sharing, or deferred compensation plan, from one party to either or both parties; (ii) subject to the consent of any lienholders, family use personal property, from one or both parties to either or both parties; and (iii) subject to the terms of any lien, real property jointly owned by the parties and used as the principal residence of the parties when they lived together * * *↩
29.
30. We note that the parties stipulated (QDRO stipulation): "No 'qualified domestic relations order' ('QDRO') has been issued to either Antonina K. Platt or Herbert Bangs either on March 2, 1983 or at any time thereafter." None of the parties argues that the QDRO stipulation means that the divorce decree involved in the instant cases may not qualify under
31. Congress added
32. Generally, a domestic relations order qualifies under
33. On brief, respondent does not advance any arguments in support of the respective determinations under
Gay M. Pfister v. Commissioner of Internal Revenue , 359 F.3d 352 ( 2004 )
Richard J. Borchers Jane E. Borchers v. Commissioner of ... , 943 F.2d 22 ( 1991 )
Bangs v. Bangs , 59 Md. App. 350 ( 1984 )
Borchers v. Commissioner , 95 T.C. 82 ( 1990 )