DocketNumber: No. 13093-08S
Citation Numbers: 2009 T.C. Summary Opinion 149, 2009 Tax Ct. Summary LEXIS 150
Judges: \"Dean, John F.\"
Filed Date: 9/24/2009
Status: Non-Precedential
Modified Date: 11/21/2020
PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
DEAN,
The issue for decision is whether petitioners are entitled to a $ 15,257.76 1 deduction for alimony paid to Pamela F. Heydt (former spouse) in 2005.
Some of the facts have been stipulated and are so found. The stipulation of facts and the exhibits received into evidence are incorporated herein by reference. When the petition was filed, petitioners resided in Oregon.
In 1980 petitioner David Timothy Heydt (Mr. *151 Heydt) and his former spouse initiated divorce proceedings. Among other things, they agreed to the payment of child and spousal support by Mr. Heydt, and the stipulation was incorporated into an order of a California superior court in August 1980. Specifically, Mr. Heydt agreed to pay monthly child support of $ 225 on the first of each month from the date of the order. He also agreed to pay monthly spousal support of $ 225 on the 15th of each month from the date of the order.
In 2005 petitioners paid $ 15,257.76 to the Placer County Department of Child Support Services (California agency). The California agency applied $ 1,339.48 of petitioners' payment to interest on child support arrearages and $ 13,918.28 to interest on spousal support arrearages. As of the close of 2005 the arrearages in Mr. Heydt's child support obligation were $ 12,088.29.
Petitioners filed a joint Federal income tax return for 2005. They claimed a $ 15,540 deduction for alimony paid in 2005. Respondent disallowed petitioners' deduction for alimony paid, determined a $ 3,145 deficiency in their Federal income tax, and issued a notice of deficiency to petitioners.
The Commissioner's determinations *152 in a notice of deficiency are presumed correct, and the taxpayer has the burden of proving that the determinations are in error. Rule 142(a);
Section 71, as amended by the Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 422, 98 Stat. 795, (DEFRA), applies to divorce or separation instruments executed after December 31, 1984.
Former section *153 215(a), generally, provided that in the case of a husband described in section 71, there shall be allowed as a deduction amounts includable under section 71 in the gross income of his wife, payment of which is made within his taxable year.
Similarly, former section 71(a)(1), in part, provided that if a wife is divorced or legally separated from her husband under a decree of divorce or separate maintenance, the wife's gross income includes periodic payments received after the decree in discharge of a legal obligation which, because of the marital or family relationship, is imposed on or incurred by the husband under the decree or under a written instrument incident to such divorce or separation. Section 71(b), in part, provided that section 71(a) does not apply to that part of any payment which the terms of the decree, instrument, or agreement fix, in terms of an amount of money or a part of the payment, as a sum which is payable for the support of minor children of the husband. And if any payment is less than the amount specified in the decree, instrument, or agreement, then so much of the payment as does not exceed the sum payable for child support shall be considered a payment for *154 child support. Sec. 71(b).
Section 163(a) provides that there shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness. Section 163(h)(1), however, provides that in the case of a taxpayer other than a corporation, no deduction is allowed for personal interest paid or accrued during the taxable year. "Personal interest" means any interest allowable as a deduction under this chapter other than certain exceptions not applicable here. Sec. 163(h)(2).
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With these principles in mind, the Court now turns to petitioners' alimony *156 deduction.
The Court finds that petitioners' $ 15,257.76 payment is allocated first to Mr. Heydt's outstanding child support obligation of $ 12,088.29, notwithstanding that the California agency allocated the payment to interest on the child support and alimony arrearages. See sec. 71(b);
The Court also finds that the remaining $ 3,169.47 is allocated pro rata as follows: (1) $ 1,537.71 2 as alimony paid; (2) $ 1,623.83 3 as interest on alimony arrearages; and (3) $ 7.93 4 as interest on child support arrearages. See
To reflect the foregoing,
1. Petitioners claimed a $ 15,540 deduction for alimony paid in 2005. Petitioners concede that they overstated their deduction by $ 282.24.↩
2. $ 3,169.47 x $ 19,525.58 (alimony arrearages) / $ 40,245.38 (sum of alimony arrearages + total interest).↩
3. $ 3,169.47 x $ 20,619.06 (interest accrued alimony arrearages) / $ 40,245.38 (sum of alimony arrearages + total interest).↩
4. $ 3,169.47 x $ 100.74 (interest accrued child support arrearages) / $ 40,245.38 (sum of alimony arrearages + total interest).↩
5. The Court notes that the statement petitioners provided represents arrearages and interest as of August 2005. To the extent that petitioners might be entitled to a greater deduction for alimony paid in 2005, their inexactitude is of their own making. See