DocketNumber: No. 13602-97
Citation Numbers: 1999 T.C. Memo. 332, 78 T.C.M. 527, 1999 Tax Ct. Memo LEXIS 384
Judges: \"Fay, William M.\"
Filed Date: 10/1/1999
Status: Non-Precedential
Modified Date: 4/18/2021
*384 Decision will be entered under Rule 155.
MEMORANDUM OPINION
FAY, JUDGE: Respondent*385 determined deficiencies of $ 13,656 and $ 7,131 in petitioner's 1994 and 1995 Federal income taxes, respectively. After concessions, the issue for decision is whether petitioner must include payments from her former husband in income under
This is a fully stipulated case that was submitted without a trial under Rule 122. The stipulation of facts and the exhibits are incorporated by this reference. Petitioner, who resided in Demarest, New Jersey, when she petitioned the Court, filed her 1994 and 1995 Federal income tax returns as a head of household. The pertinent facts follow.
BACKGROUND
Petitioner married Emelito T. Gonzales (Dr. Gonzales) in 1977; on September 21, 1995, they divorced. *386 During the marriage, they had four children, whose ages in 1994 were 15, 13, 12, and 9 years.
The Gonzaleses had lived apart for more than 18 months before petitioner filed for divorce in the Superior Court of New Jersey, Chancery Division, Bergen County (superior court). Both resided in New Jersey and were represented by counsel during the divorce proceedings.
On February 18, 1993, the superior court entered a consent order for pendente lite support (temporary order) awarding petitioner primary residential custody of the children and directing, among other things, that Dr. Gonzales pay $ 7,500 a month to support his wife and four children (family support). In relevant part, the temporary order read:
pending the resolution of this matter * * * [Dr. Gonzales] shall
pay $ 7500 per month unallocated, commencing on November 1, 1992
as and for support of * * * [petitioner] and the infant children
of the marriage, from which sum * * * [petitioner] shall
pay all family expenses including the mortgage, children's
school expenses and unreimbursed medical expenses and her
schooling * * *
The temporary order failed to indicate how the payments would be treated*387 for tax purposes, whether the payments would terminate at petitioner's death, or what portion thereof represented child support.
On September 21, 1995, the Gonzaleses signed a written agreement that settled such issues as property division, alimony, and child support (settlement agreement). Under its terms, the couple's oldest child would live with Dr. Gonzales, while the younger siblings would remain with their mother. Beginning September 21, 1995, Dr. Gonzales agreed to pay child support of $ 40,000 a year ($ 13,333.33 per child) for 9 years, or until emancipation occurred as defined in the agreement. 2
Dr. Gonzales also agreed to pay alimony for 9 years, commencing September 21, 1995, which would terminate earlier if petitioner remarried or cohabited, or if either party died. Moreover, his alimony obligation of $ 60,000 a *388 year would be reduced by $ 10,000 every 3 years. The settlement agreement was incorporated, but not merged, in a final judgment of divorce (divorce decree) rendered by the superior court on September 21, 1995.
Under the temporary order, Dr. Gonzales paid petitioner $ 90,000 in 1994 and $ 64,047 3 for the period January 1 through September 20, 1995; for the remainder of 1995, he paid $ 17,307 in alimony under the divorce decree. 4 On her 1994 and 1995 Federal income tax returns, petitioner reported $ 18,000 and $ 29,310, respectively, as alimony income.
By notice of deficiency, respondent determined that petitioner should have reported as alimony all the payments she received under the temporary order, because "none of the [amounts] is*389 treated as child support". Accordingly, for each year in issue, respondent increased her income by the difference between the amount of family support she received and the amount of alimony she reported.
Petitioner maintains that no portion of her family support payments was alimony because, under State law, Dr. Gonzales' obligation to make the payments would have survived her death. Alternatively, petitioner argues that part of the family support payments was not alimony because the settlement agreement operated to fix a portion thereof as child support. The Court agrees with petitioner's primary argument.
DISCUSSION
We must decide whether the disputed payments are includable in petitioner's income under
Generally, alimony 5 is taxable to the recipient and deductible*390 by the payor. See secs. 61(a)(8), 71, 215. A payment is alimony, includable in a spouse's gross income, when: (1) The payment is made in cash; (2) the payment is received by (or on behalf of) the spouse under a divorce or separation instrument; (3) the instrument does not designate the payment as nonalimony; (4) the spouses reside in separate households; (5) the spouses do not file a joint return; and (6) the payor's liability does not continue for any period after the spouse's death. See
The parties agree that the disputed payments meet the first five criteria enumerated above. We, therefore, concern ourselves with the last requirement; i.e., the termination-at-death provision. See
*392
Whether such an obligation exists may be determined by the terms of the applicable instrument, or if the instrument is silent on the matter, by looking to State law. 7 See
*393
New Jersey has a support statute authorizing courts to award alimony (maintenance) or child support, either pending the divorce suit or after final judgment. See
Under the New Jersey Rules of Court, courts are required to "separate *394 the amounts awarded for alimony or maintenance and the amounts awarded for child support, unless for good cause shown the court determines that the amounts should be unallocated." N.J. Ct. R. 5:7-4(a). Thus, while courts are encouraged to make specific allocations of support, they are authorized to award combined spousal and child support. Although New Jersey statutes do not say whether unallocated support payments terminate on the death of the payee spouse, a New Jersey case helps reveal the unlikelihood of that result's occurring.
In
This Court is also mindful of the temporary nature of the*397 order involved here -- pendente lite. As its name suggests, it is effective only during the pendency of a divorce proceeding. When the divorce becomes final, the pendente lite order terminates unless it provides otherwise or is reduced to judgment before-hand. See
New Jersey law also recognizes that pendente lite orders are modifiable before and at the time of final judgment. See
These things taken together suggest that New Jersey law would not necessarily have relieved Dr. Gonzales of his obligation to pay family support had petitioner died before the divorce judgment. The fact that the unallocated support order is modifiable and temporary tells us, at the least, that a court might have reduced Dr. Gonzales' payments rather than terminate them altogether. Indeed, there are no counterindications. Accordingly, we hold that the requirement of
*399 We have considered the parties' other arguments and find them unpersuasive.
To reflect concessions and our conclusion herein,
Decision will be entered under Rule 155.
1. All section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated.↩
2. The settlement agreement identified the Gonzaleses' second oldest child as having special needs whose right to child support was unaffected by the emancipation provision contained therein.↩
3. This amount was stipulated by the parties without further explanation.↩
4. Neither party disputes that this amount was alimony. We, therefore, limit our discussion to the undesignated payments petitioner received under the consent order for pendente lite support (temporary order).↩
5. We use this term to include "separate maintenance payments."
6. Although some parts of the temporary regulations have been superseded by amendments to the Internal Revenue Code, this Q&A has not been affected.
We also note that temporary regulations have binding effect and are entitled to the same weight as final regulations. See
7. As the Court in
The characterization of payments under State law
is not controlling of Federal income tax consequences.
* * * However, while the requirements of
must be considered independently of State law determination, the
impact of State law is squarely felt in any analysis of whether
payments are made in discharge of a legal obligation. In other
words, while * * * [State] law does not determine "Is this
income?," it does determine "Is this a legal obligation?" * * *↩
8. The parties agree that, since the temporary order was issued by a New Jersey court having proper jurisdiction of the divorce action, it is to be interpreted under New Jersey law. See
9. The New Jersey legislature has since made minor modifications to this statute. In relevant part, the current version of
No payment or installment of an order for child support
* * * shall be retroactively modified by the court
except with respect to the period during which there is
a pending application for modification * * *↩
10. We need not and do not characterize the disputed payments other than to hold that they were not alimony.
This holding comports with our conclusions reached in prior opinions addressing the characterization of "family support". See, e.g.,
Lecroy Research Systems Corporation v. Commissioner of ... , 751 F.2d 123 ( 1984 )
E. Norman Peterson Marital Trust, Chemical Bank, Trustee v. ... , 78 F.3d 795 ( 1996 )
Jacobitti v. Jacobitti , 263 N.J. Super. 608 ( 1993 )
Farmilette v. Farmilette , 237 N.J. Super. 29 ( 1989 )
Richard J. Borchers Jane E. Borchers v. Commissioner of ... , 943 F.2d 22 ( 1991 )
Sutphen v. Sutphen , 103 N.J. Eq. 203 ( 1928 )
Morgan v. Commissioner , 60 S. Ct. 424 ( 1940 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Thorson v. Thorson , 241 N.J. Super. 10 ( 1989 )
Schiff v. Schiff , 116 N.J. Super. 546 ( 1971 )
Mahoney v. Pennell , 285 N.J. Super. 638 ( 1995 )
Jacobson v. Jacobson , 146 N.J. Super. 491 ( 1976 )
Bowens v. Bowens , 286 N.J. Super. 70 ( 1995 )
Mallamo v. Mallamo , 280 N.J. Super. 8 ( 1995 )
Borchers v. Commissioner , 95 T.C. 82 ( 1990 )
Peterson Marital Trust v. Commissioner , 102 T.C. 790 ( 1994 )