DocketNumber： Docket No. 28304-12S
Citation Numbers： 2014 T.C. Summary Opinion 14, 2014 Tax Ct. Summary LEXIS 14
Judges： ARMEN
Filed Date： 2/19/2014
Status： Non-Precedential
Modified Date： 4/18/2021
PURSUANT TO
An appropriate order granting respondent's motion for summary judgment and decision for respondent will be entered.
ARMEN,
This case is before the Court on respondent's Motion For Summary Judgment filed pursuant to Rule 121(a). In his motion respondent moves for a summary adjudication in his favor as to the deficiency in income tax determined by him in the notice of deficiency.
Respondent determined a deficiency in petitioners' Federal income tax for 2009 of $13,323. As a threshold matter we must decide whether disposition of this case by 2014 Tax Ct. Summary LEXIS 14">*15 summary judgment is appropriate. If so, we must then decide whether petitioners are entitled to the $40,000 alimony deduction claimed on their 2009 Federal income tax return.Background Petitioners resided in Florida at the time that the petition was filed. Petitioner Roscoe Jerome McNealy married his first wife Leanetta McNealy (the former Mrs. McNealy) in 1969. On April 6, 2009, Mr. McNealy and the former Mrs. McNealy entered into a marital settlement agreement. The marital settlement agreement states in pertinent part as follows: * * * * * * * * * * * * * * The marital settlement agreement was incorporated into the Final Judgment of Dissolution of Marriage, which was entered on April 13, 2009, by the Circuit Court of the Eighth Judicial Circuit in and for Alachua County, Florida. The Final Judgment of Dissolution of Marriage expressly incorporates the marital settlement agreement and states in pertinent part: This order was based on the following "Finding of Fact", which was expressly set forth in the Final Judgment of Dissolution of Marriage: The equalization payment clause is contained in both the Final Judgment of Dissolution of Marriage and the marital settlement agreement. The clause expressly states that the $40,000 payment from Mr. McNealy to the former Mrs. McNealy is for the equalization of the distribution of marital assets. Petitioners timely filed their Form 1040, 2014 Tax Ct. Summary LEXIS 14">*18 U.S. Individual Income Tax Return, for 2009. On it, petitioners claimed a $40,000 alimony deduction for the equalization payment that Mr. McNealy made to the former Mrs. McNealy. Respondent issued a notice of deficiency determining a deficiency in income tax of $13,323 for 2009. Respondent disallowed the alimony deduction for the $40,000 payment Mr. McNealy made to the former Mrs. McNealy. Respondent did not determine any penalty. Petitioners timely filed a petition for redetermination of the deficiency and asserted that the amount paid to the former Mrs. McNealy qualifies for an alimony deduction for 2009. Respondent filed this motion for summary judgment on December 11, 2013. Petitioners filed an objection to respondent's motion on December 23, 2013. Respondent filed a reply to petitioners' objection on January 15, 2014. Rule 121 provides for summary judgment. Summary judgment serves to "expedite litigation and avoid unnecessary and expensive trials." As the moving party, respondent bears the burden of proving that no genuine dispute or issue exists as to any material fact and that respondent is entitled to judgment as a matter of law. Upon review of the record we are satisfied that there is no genuine dispute or issue as to any material fact and that a decision in favor of respondent may be rendered as a matter of law. Accordingly, for the reasons that follow we will grant respondent's motion. Generally, property settlements (or transfers of property between spouses) incident to a divorce are neither taxable events nor give rise to deductions or recognizable 2014 Tax Ct. Summary LEXIS 14">*20 income. Section 215(b) provides that the paying spouse may deduct a payment as alimony if the payment is "includible in the gross income of the recipient under section 71." For alimony to be includible in the gross income of the recipient, the payments must satisfy all of the elements of section 71. Section 71(b)(1) lists four requirements for a payment to be considered alimony: (A) such payment is received by (or on behalf of) a spouse under a divorce or separation agreement; (B) the divorce or separation agreement 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) the payee spouse and 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 2014 Tax Ct. Summary LEXIS 14">*21 of the payee spouse. Section 71 serves to establish an objective standard to distinguish between a payment received in the division of property (which is not includible in gross income) and a payment received as spousal support (which is includible in gross income). Respondent does not dispute that Mr. McNealy's payment to the former Mrs. McNealy meets the requirements of section 71(b)(1)(A) and (C). However, respondent contends that the payment does not meet the requirements of section 71(b)(1)(B) or (D). We agree. In the instant case, the marital settlement agreement states that Mr. McNealy was to pay the former Mrs. McNealy $40,000 "[a]s and for equalization of the distribution of marital assets". Under Florida law, lump-sum alimony may provide for equitable distribution of property or for support. The marital settlement agreement makes it clear that the equalization payment was 2014 Tax Ct. Summary LEXIS 14">*23 intended to ensure the equitable division of the property. Because property settlements (or transfers of property between spouses) incident to a divorce are neither taxable events nor give rise to deductions or recognizable income pursuant to section 1041, Mr. McNealy's $40,000 equalization payment to the former Mrs. McNealy is not an alimony payment. Moreover, the marital settlement agreement states that "[n]either party shall claim any entitlement to any alimony award" and that each party waives all rights to alimony of any nature which he or she may have under the laws of the State of Florida. The marital settlement agreement specifically designates Mr. McNealy's payment to the former Mrs. McNealy as an equalization payment and expressly waives each party's right to alimony payments. Accordingly, because the equalization payment is designated as not being an alimony payment, section 71(b)(1)(B) is not satisfied. Section 71(b)(1)(D) provides that for payments to qualify as alimony, there can be no requirement that the payments continue after the 2014 Tax Ct. Summary LEXIS 14">*24 death of the payee spouse. Whether that requirement is satisfied is determined by the terms of the applicable instrument or, if the instrument is silent on the matter, by State law. We first consider the terms of the marital settlement agreement. The marital settlement agreement expressly states that the agreement "shall survive * * * Judgment and be binding on parties, their personal representatives, successors, and assigns for all time." Thus, under the terms of the marital settlement agreement, Mr. McNealy's obligation to pay the $40,000 equalization payment would not have terminated upon the former Mrs. McNealy's death. In addition, Florida law provides that payments for the equitable distribution of marital assets and liabilities do not terminate upon the death of either party. If the court awards a cash payment for the purpose of equitable distribution of marital assets, to be paid in full or in installments, the full amount ordered shall vest when the judgment is awarded and the award shall not terminate upon remarriage or death of 2014 Tax Ct. Summary LEXIS 14">*25 either party, unless otherwise agreed to by the parties, but shall be treated as a debt owed from the obligor or the obligor's estate to the obligee or the obligee's estate, unless otherwise agreed to by the parties. We have already concluded that Mr. McNealy's obligation to pay the former Mrs. McNealy was for the equitable distribution of marital assets. Because the marital settlement agreement and Final Judgment of Dissolution of Marriage fail to satisfy all the requirements of section 71(b)(1), Mr. McNealy's $40,000 equalization payment made to the former Mrs. McNealy is not alimony. Accordingly, petitioners are not entitled to the alimony deduction for 2009. Petitioners argue that they relied on IRS Publication 504, Divorced or Separated 2014 Tax Ct. Summary LEXIS 14">*26 Individuals, in determining whether the equalization payment to the former Mrs. McNealy was an alimony payment and thus deductible under section 215. The publication appears to accurately portray the requirements of section 71(b)(1) as discussed above. However, even if that were not the case, we note that informal IRS publications are not authoritative sources of Federal tax law; rather, applicable statutes, regulations, and judicial decisions constitute the authoritative sources of law that inform our decisions. Petitioners also argue that they spoke with an IRS employee who advised them that the equalization payment to the former Mrs. McNealy qualified as an alimony payment. However, the law is clear that informal telephone conversations with IRS employees are not authoritative and that to ensure uniform application of the tax law, the Commissioner is not bound by erroneous, incorrect, or incomplete advice that may be given by his agents. Finally, petitioners argue that the Appeals officer who was assigned their case mailed them a proposed decision reflecting no deficiency in income tax for 2009. However, the proposed decision does not affect the outcome of this case. The letter accompanying the proposed decision clearly states: "The proposed decision document is subject to review, signature, and filing with the Tax Court by Area Counsel." Presumably, either the Appeals team manager or Area Counsel did not ultimately approve the proposed decision, as it was never executed on behalf of respondent and submitted to the Tax Court for entry. We acknowledge that petitioners attempted to ascertain the tax status of the $40,000 equalization payment by consulting an IRS publication and by speaking with IRS personnel. Those efforts could be relevant in relieving petitioners of an accuracy-related penalty if respondent had determined one, but he did not. Rather, the law as enacted by Congress and interpreted by the courts does not permit the deduction of the payment in issue. In short, because no genuine dispute or issue exists as 2014 Tax Ct. Summary LEXIS 14">*28 to any material fact and further because respondent is entitled to judgment as a matter of law, the Court is obliged to grant respondent's motion for summary judgment. In reaching the conclusions described herein, we have considered all of the arguments made by petitioners and, to the extent not expressly discussed above, we find those arguments to be moot, irrelevant, or without merit. To give effect to our disposition of the disputed issue,
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