                           T.C. Memo. 1995-592



                         UNITED STATES TAX COURT



                   JAMES A. PETRIE IV, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 10286-94.                Filed December 13, 1995.



        James A. Petrie IV, pro se.

        Christopher Neal, for respondent.



                            MEMORANDUM OPINION


        DINAN, Special Trial Judge:      This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1    Respondent determined deficiencies in petitioner's 1990


     1
            Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the taxable years in issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
and 1991 Federal income taxes in the amounts of $2,587 and

$1,183, respectively, and an addition to tax for late filing of

the return in the amount of $699 for 1990.

     After concessions by the parties,2 the issues for decision

are: (1) Whether petitioner is entitled to claim head of

household filing status for the years in issue; (2) whether

petitioner is entitled to claim a mortgage interest rental

expense for 1990; (3) whether petitioner may exclude rental

income and is entitled to claim additional rental expenses for

1991; (4) whether petitioner may exclude from income one-half of

his retirement income during the years in issue; and (5) whether

petitioner is liable for the addition to tax pursuant to section

6651(a)(1) for his failure to file a timely 1990 Federal return.

     Some of the facts have been stipulated and are so found.

The stipulations of fact and attached exhibits are incorporated

herein by this reference.       Petitioner resided in Westminster,

Colorado, on the date the petition was filed in this case.

     Petitioner and his former wife were married for 30 years and

six children were born of their marriage.          Three of their six

children were dependents of petitioner and his former wife during

the years in issue under section 151.         Petitioner and his former

wife lived together in the family residence until January 5,

1991, when due to marital difficulties, petitioner moved from the


     2
            Petitioner conceded the rental income and expense adjustments for
1990. Respondent conceded that the Form W-2, Wage and Tax Statement, income
for Ms. Petrie in the amount of $345.55 should be excluded from petitioner's
1990 income.
                               - 3 -

family residence.   The three dependent children and Ms. Petrie

continued to reside in the family residence until March 1992.

Among their marital assets, petitioner and Ms. Petrie owned

residential rental property in Mesa, Arizona (Arizona rental

property).

     On April 17, 1991, by Temporary Orders in and for the

District Court, County of Arapahoe, State of Colorado (Temporary

Orders) petitioner was ordered to make certain payments,

including temporary child support payments and awarded temporary

possession of certain personal marital property.    The Temporary

Orders considered the earning potential of petitioner and Ms.

Petrie and considered petitioner's AT&T retirement income in

arriving at its determinations.     The Temporary Orders required

petitioner to pay all expenses, including the first and second

mortgage payments totaling approximately $340 per month on the

Arizona rental property and directed that the rental property

income of approximately $600 per month be paid directly to Ms.

Petrie.   The Temporary Orders were intentionally "phrase[d] * * *

in terms of receipt of the proceeds from the Arizona rental

property rather than a maintenance order".    The Temporary Orders

awarded Ms. Petrie temporary custody of the dependent children

and required petitioner to pay child support in accordance with

the State of Colorado guidelines.

     By Final Orders dated January 3, 1992, in and for the

District Court, County of Arapahoe, State of Colorado (Final
                                    - 4 -

Order), the Court entered a decree for dissolution of

petitioner's and Ms. Petrie's marriage.          The Final Orders awarded

petitioner the family residence, and granted Ms. Petrie the right

to remain in the family residence until August 1992.            Ms. Petrie

was awarded the Arizona rental property subject to the

outstanding mortgages.

        The Final Orders made reference to petitioner's AT&T

retirement income as follows:

        The Court finds that the Husband is the recipient of a
        pension from AT&T which was accumulated during the
        course of the marriage and is, therefore, marital
        property subject to division by this Court. From the
        evidence, the Court has determined that both parties
        have made substantial contributions during the course
        of the marriage, and that it would be inequitable to
        not grant the Wife any interest in the proceeds of this
        pension. From the testimony, the court finds the
        present amount being paid under the pension is
        $1,849.87 per month. It is ordered that the parties
        shall divide equally the income from the pension
        commencing March 1, 1992. [Emphasis added.]

        Ms. Petrie and the three dependent children moved from the

family residence to the Arizona rental property in March 1992.3

At that time, petitioner took possession of the family residence.

After regaining possession of the family residence, petitioner

first timely filed a 1991 joint Federal return and in May 1992

filed an unsigned 1990 joint Federal return.4

    3
            Ms. Petrie and the dependent children moved from the family
residence in March 1992 although the Final Orders provided for them to remain
in the family residence until August 1992.
     4
            Subsequent to the filing of the 1990 joint Federal return,
petitioner signed a declaration, under the penalties of perjury, that he
examined the 1990 joint Federal return and to the best of his knowledge and
                                    - 5 -

        The 1990 joint Federal return claimed married filing jointly

filing status, claimed a personal exemption for petitioner, an

exemption for Ms. Petrie and three dependency exemptions.             The

1990 joint Federal return reported petitioner's W-2 income, Ms.

Petrie's Form W-2 income in the amount of $345.55, petitioner's

AT&T retirement income in the amount of $20,408,5 a taxable IRA

distribution, 100 percent of the Arizona rental property income

in the amount of $5,500, and 100 percent of the Arizona rental

property expenses in the amount of $3,799.6           When he filed his

1990 joint Federal return, petitioner paid taxes in the amount of

$2,077, and estimated interest on late filing of $1,000 and

disclosed his former spouse's failure to sign the return.

        Petitioner later filed an amended 1990 Federal return in

which he claimed head of household filing status, omitted the

exemption amount for Ms. Petrie, omitted Ms. Petrie's Form




belief it was true, correct, and complete.
     5
            Petitioner reported the AT&T retirement income on line 7 "wages,
salaries, tips, etc."
    6
            For 1990, on petitioner's Schedule E, the Arizona rental property
expenses incorrectly reflected a total of $3,829. The Arizona rental property
expenses are as follows:

        Automobile and travel               $522
        Cleaning and maintenance             795
        Insurance                               336
        Taxes                             850
        Motel                              20
        Meals                              63
        Depreciation                        1,213
              Total                   3,799
                                      - 6 -

W-2 income, and excluded the Arizona rental property income.

           The notice of deficiency, based on petitioner's 1990

joint Federal return, changed petitioner's filing status to

married filing separately, disallowed the exemption for Ms.

Petrie, reduced petitioner's rental income by $2,750,7 and

disallowed $2,629 of petitioner's rental expenses.

     For 1991, petitioner initially timely filed a joint Federal

return and claimed exemptions for himself and Ms. Petrie and

three dependency exemptions.       The 1991 joint Federal return

reported petitioner's W-2 income, petitioner's AT&T retirement

income, 100 percent of the income from the Arizona rental

property in the amount of $6,000, and Arizona rental property

expenses of $4,608.8

     Petitioner amended his 1991 joint Federal return in which he

claimed head of household filing status, omitted the exemption

amount for Ms. Petrie, and excluded the Arizona rental property

income.




     7
            One-half of $5,500, the amount reported by petitioner on the 1990
joint Federal return.
     8
            The 1991 rental expenses reported by petitioner on the joint
Federal return were as follows:

           Auto and travel                    $300
           Cleaning and maintenance                  200
           Insurance                                 325
           Mortgage interest            1,530
           Repairs                                   250
           Taxes                          790
           Depreciation                         1,213
                 Total                  4,608
                                    - 7 -

     The notice of deficiency, based on the 1991 joint Federal

return disallowed the exemption amount for Ms. Petrie, reduced

petitioner's reported rental income by $3,0009 and disallowed

$2,30410 of petitioner's rental expense.

     The first issue for decision is whether petitioner is

entitled to use head of household filing status11 for the years

in issue.    Petitioner contends that he is entitled to claim head

of household filing status as claimed on his 1990 and 1991

amended returns.     Respondent contends that petitioner was married

during the years in issue and because Ms. Petrie did not join in

the filing of the returns, petitioner must claim married filing

separately filing status.

     Section 1 imposes a tax on the taxable income of

individuals.    The rate of tax depends on the taxpayer's filing

status.   Sec. 1(a) through (d).       There are four filing categories

for individual taxpayers:       (1) Married filing a joint return; (2)

unmarried head of household; (3) unmarried individual; and (4)

married filing a separate return.


     9
            One-half of the amount reported on petitioner's 1991
joint Federal return.
    10
            One-half of the amount claimed on petitioner's 1991 joint Federal
return.
     11
            Head of household filing status requires that the taxpayer who is
not married at the close of the year maintain as his home a household which
constitutes for more than one-half of the taxable year, the principal place of
abode of any person who is a dependent of the taxpayer, provided that the
taxpayer is entitled to a deduction for such person under section 151. Sec.
2(b)(1)(A)(ii).
                                    - 8 -

     The marginal tax rates are lowest for married individuals

filing jointly and they progressively increase for each category

as follows:    Head of household, individual, and married filing

separately.

     The threshold issue in determining filing status is to

determine marital status.       Marital status for purposes of filing

a joint or separate return is determined under section 7703.

     Under section 7703(a), a taxpayer who is "married" may be

considered unmarried for tax purposes, if he is legally separated

under a decree of divorce or separate maintenance or meets the

requirements of section 7703(b).12

     An individual is considered legally separated under a decree

of divorce or separate maintenance if the decree "expressly and

affirmatively provides that the parties live apart in the

future".   Capodanno v. Commissioner, 69 T.C. 638, 646 (1978),

affd. 602 F.2d 64 (3d Cir. 1979) (quoting Boettiger v.

Commissioner, 31 T.C. 477, 483 (1958)).          A decree of support or

temporary alimony which does not require separation is not

considered a decree of divorce or separate maintenance within the

meaning of section 7703(a).       Dunn v. Commissioner, 70 T.C. 361

(1978), affd. without published opinion 607 F.2d 995 (2d Cir.

1979).


     12
            Section 7703(b) requires that the taxpayer maintain as his home a
household which constitutes for more than half of the taxable year the
principal place of abode for a child with respect to whom the taxpayer is
entitled to a dependency deduction.
                               - 9 -

     Petitioner separated from Ms. Petrie on January 5, 1991.      At

the close of the 1990 tax year petitioner was married, lived with

his former wife in the family residence, and does not qualify for

head of household filing status.

     Petitioner was separated from Ms. Petrie at the close of the

1991 tax year.   First, we must consider whether the Temporary

Orders constitute a decree of separate maintenance for purposes

of section 7703.   The Temporary Orders failed to provide that

petitioner and Ms. Petrie live apart.   The Temporary Orders

constitute a temporary decree for support which does not satisfy

the requirement that the parties be legally separated under a

decree of divorce or separate maintenance.    Dunn v. Commissioner,

supra.

     Secondly, petitioner did not maintain as his household a

principal place of abode for a dependent child and accordingly

does not meet the requirements of section 7703(b).    Therefore,

for 1991, petitioner was married for purposes of section 7703 and

is not entitled to claim head of household filing status.

Accordingly, respondent is sustained on this issue.

     The second issue for decision is whether petitioner may

claim a mortgage interest expense for 1990.   Petitioner contends

that he is entitled to a mortgage interest deduction for the

interest paid on the Arizona rental property.   Respondent

contends that petitioner was unable to substantiate the mortgage

interest deduction.
                                 - 10 -

       Interest on a mortgage on real estate is deductible.   Sec.

163.    Where mortgaged property is jointly owned and the co-owners

are jointly liable on the mortgage each owner is entitled to a

deduction for the mortgage interest that he actually pays out of

his own funds.    Castaneda-Benitez v. Commissioner, T.C. Memo.

1981-157.

       Section 6001 and the regulations promulgated thereunder

require a taxpayer to maintain adequate records to substantiate

the claimed deductions.    However, if certain claimed deductions

are not substantiated, we are permitted to estimate them when we

are convinced from the record that the taxpayer has incurred such

expense and we have a basis upon which to make an estimate.

Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930); Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985).

       Petitioner testified that he paid $1,575 of mortgage

interest expense on the Arizona rental property for 1990.

       For 1990, the record shows that petitioner's funds were used

to make the mortgage payments.     Further, the Temporary and Final

Orders required petitioner to continue to make the mortgage

payments on the Arizona rental property of approximately $340 a

month.    We further note that Ms. Petrie assumed the outstanding

mortgage in 1992.    We are convinced from the record that there

was an outstanding mortgage on the Arizona rental property in

1990, and that petitioner made the mortgage payments.

Accordingly, we find that petitioner is entitled to a mortgage
                                   - 11 -

interest deduction for 1990 on Schedule E for the mortgage

interest paid by him in the amount of $1,575.           Cohan v.

Commissioner, supra.      (See discussion of mortgage interest

deductions by co-owners of real property infra pp. 11-12.)

     The third issue for decision is whether petitioner had

additional rental income and is entitled to claim additional

rental expenses for 1991.       Petitioner contends he should be

permitted to exclude the rental income on his 1991 return and is

entitled to claim the rental expenses because the Temporary

Orders mandated such treatment.        Respondent contends that

petitioner must report his share of the income and expenses.13

     Income with respect to joint tenancy property is allocated

and taxed in proportion to that which each co-owner is entitled

to receive under local law.       Parsons v. Commissioner, 43 T.C. 378

(1964).   A co-tenancy under Colorado law provides that each of

two joint tenants owns an undivided one-half interest in the

property as a whole.      Commercial Factors v. Clarke & Waggener,

684 P.2d 261 (Colo. Ct. App. 1984).

     However, co-owners are entitled to a deduction for mortgage

interest and real estate taxes paid on jointly-owned property to

the extent that they have actually paid these amounts and

provided that no other tenant has previously claimed a deduction


     13
            Prior to trial, respondent conceded that petitioner should report
rental income of $750 and be allowed rental expenses of $4,032. At trial,
respondent withdrew this concession.
                                - 12 -

therefor.    Blackburn v. Commissioner, T.C. Memo. 1979-266, affd.

681 F.2d 461 (6th Cir. 1982); Finney v. Commissioner, T.C. Memo.

1976-329.    The reason for treating interest and taxes differently

from other types of expenses and losses is that even though a co-

owner may not be personally liable for the entire amount of the

interest and taxes, payment may be necessary to preserve that co-

owner's rights in the entire property.    Powell v. Commissioner,

T.C. Memo. 1967-32.

     For the first 3 months of 1991, petitioner was entitled to

receive one-half of the rental income from the Arizona rental

property as a co-owner.    Pursuant to the Uniform Dissolution of

Marriage Act, Colo. Rev. Stat. sec. 14-10-114 (1987), the

Temporary Orders awarded Ms. Petrie the $600 monthly rental

income from the Arizona property subsequent to March 21, 1991.

Under Colorado law, the right to income from real property is an

incident of ownership and the award thereof is not an award of

alimony.    McDonald v. McDonald, 150 Colo. 492, 374 P.2d 690

(1962).    The $600 monthly rental income awarded to Ms. Petrie

also was not child support because the Temporary Orders

specifically provided that petitioner was to pay $960 per month

as child support.

     Petitioner, therefore, must include in his 1991 income, one-

half of the Arizona rental income for the first 3 months of 1991

($900).    Parsons v. Commissioner, supra; Commercial Factors v.

Clarke & Waggener, supra.    He is not required to include in his
                                    - 13 -

1991 income any portion of the Arizona rental income awarded to

Ms. Petrie for the period April through December 1991.

     Petitioner testified that pursuant to the Temporary Orders,

he paid the mortgage interest and real estate taxes on the

Arizona rental property.        The record supports petitioner's

testimony, and we find petitioner to have been a credible

witness.

     The mortgage interest and real estate taxes are contained in

the mortgage payments.       Therefore we are convinced from the

record that petitioner made the mortgage interest and real estate

taxes payments.      Cohan v. Commissioner, supra.       Petitioner is

therefore entitled to a deduction for mortgage interest in the

amount of $1,530 and real estate taxes of $790, totaling $2,320.

Blackburn v. Commissioner, supra.

     With respect to the Arizona rental property expenses, other

than the mortgage interest and real estate taxes, petitioner is

entitled to a deduction for one-half of those amounts totaling

$1,145.14.    Estate of Boyd v. Commissioner, 28 T.C. 564 (1957).

     Next, we must consider whether petitioner may reduce his

income by one-half of his retirement income.           On his 1990 and

1991 returns, petitioner reported $20,408.25 and $22,198.40 of


    14
             Auto and travel             $150
             Cleaning and maintenance            100
             Insurance                           163
             Repairs                             125
             Depreciation                       607
                 Total                       1,145
                               - 14 -

retirement income.   At trial, petitioner raised the issue of

whether he may reduce his gross income for 1990 and 1991 by one-

half of his AT&T retirement income.     Petitioner contends that

because his AT&T retirement income was considered marital

property by the Final Orders entered in 1992 and his former

spouse was ultimately awarded one-half of his AT&T retirement

benefits commencing with the monthly payments made on or after

March 1, 1992, he should be taxed on only one-half of the

retirement benefits that he received during 1990 and 1991.

Respondent contends that petitioner received all the AT&T

retirement income during the years in issue and must report the

full amount.

     Section 61(a) provides that gross income includes all income

from whatever source derived, unless excludable by a specific

provision of the Code.   Respondent's determinations in the

statutory notice of deficiency are presumed to be correct, and

the taxpayer has the burden of proving otherwise.     Rule 142(a);

Helvering v. Taylor, 293 U.S. 507 (1935); Welch v. Helvering, 290

U.S. 111 (1933).   Exemptions from gross income, having been

specifically stated, should be construed with restraint.

Commissioner v. Jacobson, 336 U.S. 28, 49 (1949); Hagar v.

Commissioner, 43 T.C. 468, 484 (1965).

     The Final Order directed that Ms. Petrie receive one-half of

petitioner's AT&T retirement benefits commencing March 1, 1992.

Prior to March 1, 1992, petitioner received the AT&T retirement
                                - 15 -

income directly and made payments pursuant to the Temporary and

Final Orders.    Petitioner received 100 percent of the AT&T

retirement benefits during the years in issue and must report the

full amount unless otherwise excluded.    Sec. 61(a).   There is no

basis for exclusion.    Rule 142(a).

       Petitioner's argument that Colorado is a community property

State is incorrect.    In re Marriage of Ellis, 36 Colo. App. 234

(1975), affd. 191 Colo. 317 (1976), 538 P.2d 1347 and 552 P.2d

506.    Petitioner is not entitled to reduce his AT&T retirement

income by the one-half amount ultimately awarded to Ms. Petrie.

Cook v. Commissioner, 80 T.C. 512, 518-19 (1983), affd. without

published opinion 742 F.2d 1431 (2d Cir. 1984).    Accordingly,

respondent is sustained on this issue.

       The final issue for decision is whether petitioner is liable

for the addition to tax imposed pursuant to section 6651(a)(1)

for failure to file a timely 1990 return.    Section 6651(a)(1)

imposes an addition to tax for failure to timely file a return,

unless the taxpayer establishes: (1) The failure did not result

from "willful neglect"; and (2) the failure was "due to

reasonable cause".    "Willful neglect" has been interpreted to

mean a conscious, intentional failure, or reckless indifference.

United States v. Boyle, 469 U.S. 241, 245-246 (1985).

"Reasonable cause" requires the taxpayer to demonstrate that he

exercised ordinary business care and prudence and was nonetheless

unable to file a return within the prescribed time.     United
                                 - 16 -

States v. Boyle, supra at 246; sec. 301.6651-1(c)(1), Proced. &

Admin. Regs.   The addition to tax equals 5 percent of the tax

required to be shown on the return for the first month, with an

additional 5 percent for each additional month or fraction of a

month during which the failure to file continues, not to exceed a

maximum of 25 percent.   Sec. 6651(a)(1).

     Petitioner testified that 1990 was the first time he had

filed a late return.   Petitioner testified that he was in the

middle of a divorce and did not have access to the premises or

his tax records until March of 1992.      Petitioner testified that

his Form W-2 went to the family residence which was in the

exclusive possession of his former spouse.

     Petitioner testified "I did everything I could to get it

done" and that he was precluded from filing a timely 1990 return

because he did not have access to the family residence or his

records until March 1992.   We find that petitioner failed to

exercise ordinary business care in timely filing his 1990 return.

Petitioner could have requested a duplicate Form W-2 in order to

timely file his 1990 return but failed to do so.

     Accordingly, we find petitioner is liable for the addition

to tax pursuant to section 6651(a)(1).

     To reflect the foregoing,

                                            Decision will be entered

                                            under Rule 155.
