DocketNumber: No. 1592-01; No. 4178-01
Citation Numbers: 85 T.C.M. 1087, 2003 Tax Ct. Memo LEXIS 92, 2003 T.C. Memo. 92
Judges: \"Wells, Thomas B.\"
Filed Date: 3/28/2003
Status: Non-Precedential
Modified Date: 4/17/2021
*92 Decisions was entered for government.
MEMORANDUM OPINION
WELLS, Chief Judge: Respondent determined deficiencies in the Federal income tax of petitioner Jane Gilbert, formerly Jane Hawley (Ms. Gilbert), for the taxable years 1993, 1994, and 1995 of $ 7,163, $ 8,922, and $ 6,157, respectively. Respondent determined deficiencies in the Federal income tax of petitioner Richard C. Hawley, M.D. (Mr. Hawley), for the taxable years 1993, 1994, and 1995 of $ 21,644, $ 23,261, and $ 19,355, respectively. 1
After concessions, the issue remaining to be decided in the instant cases is whether any part of the unallocated child and spousal support payments constitutes alimony under
*93 Background
The parties submitted the instant case fully stipulated, without trial, pursuant to
Petitioners were residents of Pennsylvania when they petitioned this Court. On April 25, 1977, petitioners were married in Buchanan, Georgia. Three children were born of petitioners' marriage: Charles R. Hawley (born September 7, 1978), Katherine G. Hawley (born July 9, 1980), and Margaret G. Hawley (born August 25, 1983).
On September 22, 1990, petitioners separated and thereafter were not members of the same household. On October 23, 1990, Ms. Gilbert sued Mr. Hawley*94 for divorce. On October 25, 1990, Mr. Hawley answered and counterclaimed against Ms. Gilbert for divorce. At the time petitioners initiated the divorce proceedings, they were residents of Schuylkill County, Pennsylvania.
On February 4, 1992, the Court of Common Pleas of Schuylkill County entered an agreement and order of support (hereinafter the February 4, 1992, separation instrument), which stated:
AND NOW, this 4th day of February, 1992, upon agreement of
the parties, it is hereby ORDERED that the Defendant is directed
to pay the sum of $ 2,077.00 bi-weekly for and toward the
support of wife and three (3) minor children. In addition, the
Defendant is directed to pay the sum of $ 100.00 bi-weekly on
account of accumulated arrearages, for a total sum of $ 2,177.00
bi-weekly. The first payment in the sum of $ 2,177.00 is to be
made February 5, 1992 and a like sum each second Wednesday
thereafter.
As of February 5, 1992 the arrearage balance shall be
$ 2,224.00
This Order is to be effective February 5, 1992.
All payments are to be made*95 to the Domestic Relations
Section of this Court and mailed to P. O. Box 1192, Pottsville,
correspondence mailed to this office.
The parties are directed to make available to all
dependents named in this Order any employer-provided medical or
other benefits available at no cost as a benefit of employment
or at a reasonable cost. The parties are directed to notify the
Domestic Relations Section in writing within seven (7)
days of obtaining coverage or any change in coverage.
Both parties shall inform the Domestic Relations Section
in writing of any change in employment, change of address
or change of address of a child receiving support within seven
(7) days of such change.
An automatic wage attachment shall be issued without notice
on Defendant upon default of an amount equal to one month's
support obligation or at such other time as the Court may
designate.
Plaintiff will be responsible to pay the first $ 1,000.00
per year for*96 uninsured medical expenses including dental,
orthodontic, optical and prescription drugs. Any uninsured
medical expenses in excess of $ 1,000.00 per year shall be
divided between the parties: Plaintiff 35% and Defendant 65%.
Commencing with the payment due March 1, 1992 Plaintiff
shall be obligated to make the monthly mortgage payments on the
residence located at 365 Pershing Drive, Orwigsburg, Schuylkill
County, Pennsylvania.
Mr. Hawley deducted $ 54,100 in 1993, $ 54,100 in 1994, and $ 51,565 in 1995 as alimony paid to Ms. Gilbert.
Ms. Gilbert did not report the receipt of any payments from Mr. Hawley for 1993, 1994, and 1995. 4
On July 18, 1995, petitioners divorced. On November 20, 1995, pursuant to a petition to the Court of Common Pleas of Schuylkill County, that court terminated Mr. *97 Hawley's obligation to provide spousal support for Ms. Gilbert and transferred the matter to the Domestic Relations Office for "a determination of the appropriate amount of child support." 5
Discussion
We must decide whether all or any part of the predivorce unallocated support payments made by Mr. Hawley to Ms. Gilbert qualify as alimony to the payee spouse, Ms. Gilbert, includable*98 in gross income under
To be considered alimony unallocated support payments must conform to the requirements of
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 includable
in gross income under this section and not allowable as a
deduction under
(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*100 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.
In the instant case, the parties agree that the unallocated support payments meet the requirements subparagraphs
*101 In deciding whether the payments were alimony, we examine the language of the February 4, 1992, separation instrument to ascertain whether it contains a termination upon death condition, and, if it does not, whether State law supplies such a condition.
State law determines certain rights of the parties, and Federal law determines the Federal income tax consequences of those rights.
When examining a matter of State substantive law, we will look to a State's highest court to determine the rights of parties under State law. See
Mr. Hawley contends that we must apply
Twenty-three Pa. Cons. Stat. Ann.
(a) General rule. -- The court making an order of support
shall at all times maintain jurisdiction of the matter for the
purpose of enforcement of the order and for the purpose of
increasing, decreasing, modifying or rescinding the order unless
otherwise provided by Part VIII (relating to uniform interstate
family support) or VIII-A (relating to intrastate family
support) without limiting the right of the obligee, or the
department if it has an assignment or other interest, to
institute additional proceedings for support in any county in
which the obligor resides or in which property of the obligor is
situated. The Supreme Court shall by general rule establish
procedures by which each interested party shall be notified of
all proceedings in which support obligations might be
established or modified and shall receive a copy of any order
issued in a case within 14 days after issuance of such order. *104 A
petition for modification of a support order may be filed at any
time and shall be granted if the requesting party demonstrates a
substantial change in circumstances.
Twenty-three Pa. Cons. Stat.
Mr. Hawley contends that the doctrine of abatement applies to the instant cases, and thus the unallocated support order would terminate upon Ms. Gilbert's death. Before the entry of divorce in Pennsylvania, divorce actions abate upon the death of one of the parties.
*107 Twenty-three Pa. Cons. Stat. Ann.
*109 For the years in issue, Pennsylvania State law does not provide an explicit termination condition on separation instruments. Nor do we find such a condition in the language of the February 4, 1992, separation instrument itself.
In pertinent part, the February 4, 1992, separation instrument orders: "An automatic wage attachment shall be issued without notice on Defendant upon default of an amount equal to one month's support obligation or at such other time as the Court may designate." Mr. Hawley is designated the defendant in the February 4, 1992, separation instrument. The unallocated support payments do not necessarily cease upon the death of Ms. Gilbert because the Pennsylvania court may attach Mr. Hawley's wages for failure to pay an unallocated support obligation, or attach Mr. Hawley's wages "at such other time as the Court may designate." As a result of such an attachment, Mr. Hawley's liability under the February 4, 1992, separation instrument may extend beyond Ms. Gilbert's death.
In
Accordingly, we hold that Mr. Hawley's obligation to provide unallocated support to Ms. Gilbert and their children may continue after the death of Ms. Gilbert and consequently hold that
We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit, irrelevant, or moot.
To reflect the foregoing,
*111 Decisions will be entered under
1. These cases have been consolidated for purposes of briefing and opinion because they involve common questions of law and fact arising from the separation and divorce of petitioners.↩
2. All section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure. ↩
3. Respondent objects on grounds of relevance to stipulations 12, 13, and 23. Both Ms. Gilbert and respondent object on grounds of relevance to stipulation 25. This Court finds these objections to be moot because this Court does not rely upon those stipulations in reaching our decision.↩
4. Ms. Gilbert filed tax returns for 1993 and 1995 but not for 1994. Ms. Gilbert qualified for head-of-household filing status for 1993, 1994, and 1995.↩
5. The order granting Mr. Hawley's petition to terminate spousal support stated:
AND NOW, this 20th day of November, 1995, at 9: 00 a. m., the
Court hereby ORDERS the following:
1. The defendant's Petition To Terminate Spousal Support is
GRANTED as the obligation for spousal support is terminated as a
matter of law by the entry of the July 18, 1995 Decree in
Divorce; and
2. This matter is TRANSFERRED to the Domestic Relations
Office for a determination of the appropriate amount of child
support.↩
6.
* * * * * * *
(8) Alimony and separate maintenance payments; * * *↩
7.
8.
9. Mr. Hawley contends that we should follow
10. Haviland v.
11. We have examined a state statute similar to
12.
Subject to the provisions of this chapter:
* * * * * * *
(2) Parents are liable for the support of their children
who are unemancipated and 18 years of age or younger.↩
13. Pennsylvania law treats alimony support orders and child support orders differently.
Lovejoy v. Commissioner , 293 F.3d 1208 ( 2002 )
Richard E. Hoover v. Commissioner of Internal Revenue , 102 F.3d 842 ( 1996 )
Lucas v. Earl , 50 S. Ct. 241 ( 1930 )
Haviland v. Haviland , 333 Pa. Super. 162 ( 1984 )
Soncini v. Soncini , 417 Pa. Super. 393 ( 1992 )
Matuszek, Admr. v. Matuszek , 160 Pa. Super. 526 ( 1947 )
Morgan v. Commissioner , 60 S. Ct. 424 ( 1940 )