                   T.C. Summary Opinion 2009-149



                      UNITED STATES TAX COURT



        DAVID TIMOTHY AND JENNIFER F. HEYDT, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13093-08S.             Filed September 24, 2009.



     David Timothy and Jennifer F. Heydt, pro sese.

     Jill Morris and Janice B. Geier, for respondent.



     DEAN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.   Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case.   Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the year in issue,
                              - 2 -

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     The issue for decision is whether petitioners are entitled

to a $15,257.761 deduction for alimony paid to Pamela F. Heydt

(former spouse) in 2005.

                           Background

     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. 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


     1
      Petitioners claimed a $15,540 deduction for alimony paid in
2005. Petitioners concede that they overstated their deduction
by $282.24.
                                 - 3 -

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.

                             Discussion

I.   Burden of Proof

      The Commissioner’s determinations 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); Welch v.

Helvering, 290 U.S. 111, 115 (1933).      But the burden of proof on

factual issues that affect a taxpayer’s tax liability may be

shifted to the Commissioner if he introduces credible evidence

with respect to the issue.   Sec. 7491(a)(1) and (2).    Petitioners

have not alleged that section 7491(a) applies, but the Court need

not decide whether the burden shifted to respondent since the

Court’s analysis is based on the record before it, not on who

bears the burden of proof.
                                - 4 -

II.   Alimony Deduction

      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.   Sec. 1.71-1T(e), Temporary Income Tax Regs., 49 Fed. Reg.

34458 (Aug. 31, 1984).    Mr. Heydt and his former spouse’s

stipulation was incorporated into the superior court’s order in

August 1980.   Accordingly, the tax consequences of petitioners’

payments are governed by relevant sections of the Internal

Revenue Code as in effect before DEFRA amended section 71.

      Former section 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
                               - 5 -

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 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).

     In Borbonus v. Commissioner, 42 T.C. 983, 984-986 (1964),

the payor and payee had entered into a separation agreement in

1951, which provided for the payment of alimony and child support

and was incorporated into a decree of divorce.       When the payor

defaulted on his child support obligation, the payee sued for the

child support arrearages, interest, and costs; the court entered

judgment in her favor of $7,055.79.    Id. at 986.    The payor and

payee stipulated a settlement whereby the payor agreed to pay

$7,000 in satisfaction of the judgment, among other things.       Id.

at 987.   The payor deducted the $7,000 payment as alimony.      Id.
                                - 6 -

The Court held that the $7,000 payment was allocated first to the

outstanding child support obligation of $6,540 and then to the

costs of $72.39 and interest on the indebtedness of $387.61.        Id.

at 992-993.   The Court held further that the payor was not

entitled to deduct the portion of the payment allocated to child

support.   Id.

     In Smith v. Commissioner, 51 T.C. 1, 3 (1968), the payee was

awarded a judgment in 1961 for specific amounts as alimony,

temporary support, child support, interest, and other

nondeductible items (e.g., costs, legal fees, discharge of an

encumbrance).    The payor and payee entered into a settlement

agreement whereby the payor agreed to pay the payee $10,000, the

payee agreed to release the payor from certain obligations and

all liability under the 1957 and 1961 judgments, and the payee

relinquished any claim to further alimony.     Id.   The payor

deducted the $10,000 payment as alimony.     Id.   The Court held

that the $10,000 payment was first allocated to the payor’s

outstanding child support obligation of $445 and that any excess

was to be allocated pro rata to the remaining items under the

judgment (e.g., alimony, interest, and other nondeductible

items).    Id. at 5.

     With these principles in mind, the Court now turns to

petitioners’ alimony deduction.
                                   - 7 -

       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); Smith v. Commissioner, supra

at 5; Borbonus v. Commissioner, supra at 991-993; see also Miller

v. Commissioner, T.C. Memo. 1972-9 (characterization of the

payments as child support or alimony and the right to any

deduction must be decided under Federal law).       Because the amount

is a payment of child support as defined by section 71(b),

petitioners are not entitled to deduct it.       See sec. 215(a).

       The Court also finds that the remaining $3,169.47 is

allocated pro rata as follows:       (1) $1,537.712 as alimony paid;

(2) $1,623.833 as interest on alimony arrearages; and (3) $7.934

as interest on child support arrearages.       See Smith v.

Commissioner, supra at 5; Borbonus v. Commissioner, supra at 992-

993.       Accordingly, petitioners are entitled to a $1,537.71

deduction for alimony paid in 2005, see sec. 215(a), but



       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).
                                 - 8 -

petitioners are not entitled to deduct those amounts allocated to

interest expense, see sec. 163(h)(1) and (2).5

     To reflect the foregoing,


                                           Decision will be entered

                                      under Rule 155.




     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 Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.
1930).
